As industry super funds move to offer financial advice, they have been accused of ‘delaying’ money transfers

There is mounting evidence that big super funds are delaying the transfer of money to investors who need it the most.

Less than 1 per cent of rollovers are transferred within the specified three to five day time period.

Australia’s biggest super funds are blocking attempts by older Australians to withdraw money.

The controversy has emerged just as the government prepares to allow industry funds an expansion into financial advice.

‘Rollover rejections’ now appear to be rampant across the super system with top players such as Hostplus, Aware, Hesta and Russell Investments accused of ‘deploying a range of strategies to delay releasing super money,’ according to specialist accountancy group Freedom Financial Solutions.

So-called ‘rollover requests’ which should not take more than 5 days under regulations are taking on average 30 days, Freedom FS numbers suggest.

“In more than two decades, we have never experienced big industry and retail funds being so uncooperative,” says Catherine Smith of Freedom FS.

“The big industry funds are the worst, and it is not acceptable because in the case of simple rollover requests, the money is staying inside the super system anyway,” she explains.

The concerns are echoed in statements from the Australian Financial Complaints Authority, which recently reported it has received more than 6,000 complaints relating to superannuation over the 12 months to May. An AFCA spokesperson says it is “seeing the number of superannuation complaints involving delays increase throughout the year”.

Smith says in her experience, less than 1 per cent of rollovers are transferred within the specified three to five day time period.

Reports of bad habits among ‘Big Super’ funds have become widespread in recent months.

In one case – openly discussed in the advice industry – Australian Super did not hand over money kept in Macquarie Bank because the adviser could not produce a BSB number for Australia’s biggest investment bank.

“It’s a nightmare if funds are going to create these issues,” according to one adviser.

The poor practice has also come to light as the wider public escalates requests from super funds to withdraw money. Statistics from the prudential regulator suggest that withdrawals from super are on the rise, with the amount lifting 20 per cent last year.

‘Big super’ will be allowed to offer wider financial advice services under new legislation announced last week.

But consumer groups have warned that any widening of industry fund power must come with safeguards which ensure such funds do not abuse their dominant role in the super system.

Under proposed legislation only major super funds will be allowed to extend financial advice services, however life insurers and banks have been told they will not be allowed to do the same without further consultation.

‘Rollover applications’ specifically involve a fund member requesting the super fund transfers money inside the super system to another fund, often to a Self Managed Super Fund.

Smith says the group deals with more than 1,000 rollovers a year and has made complaints to the Australian Financial Complaints Authority over the behaviour of several big funds.

“We see much better practice as some of the smaller operators,” says Smith who lists IOOF, Asgard, Resolution Life, QSuper and Hub 24 as having ‘good records’ in this area.

There are more than 1.1 million Australians using Self Managed Super funds, with around 27,000 new funds established last year.

Meanwhile, industry funds have released separate data indicating that around a quarter of super withdrawals are from older Australians trying to cover everyday expenses.

A statement from AFCA last week said it discusses “delay complaints regularly with our member funds” and concluded the increase in complaints is due to a number of reasons, including resourcing issues and changes to the way funds handle claims.