Super probe must examine funds’ treatment of savers

The financial interests of workers saving for retirement through superannuation is a strong driver of the Australian Securities & Investments Commission’s pursuit of allegations that the CFMEU-linked Cbus superannuation scheme mishandled death and disability claims. The fund, with $94bn under management, has 900,000 members and is chaired by ALP president and former treasurer Wayne Swan. Cbus will face the Federal Court over alleged mishandling of $20m in insurance money owed to grieving families and people with disabilities. But the problem could be more widespread.

On Wednesday, Angelica Snowden reported, ASIC deputy chair Sarah Court raised the possibility that the problems also extended to other funds. That is why the corporate watchdog is doing “deep dive surveillance” of super trustees’ handling of claims. It will produce a detailed report early in the new year. For the sake of workers, for whom super contributions are compulsory to save for retirement, systemic problems need to be rectified – through the courts if needs be. If correct, allegations such as those levied against Cbus are unacceptable. And they are not isolated instances. On December 31, 2022, ASIC alleges, Cbus had failed to resolve more than half of its 7731 total ­permanent disability claims within 12 months. And more than half of 3622 death benefits claims had not been resolved within the same timeframe.

As Ms Court says, the allegations against Cbus are deeply concerning because the money involved belongs to the fund’s members themselves. When they suffered “significant and distressing life events’’ – the death of a loved one or a profound illness or injury – members needed immediate processing and attention to their entitlements. “The fund owes them particular obligations,” Ms Court said. ASIC also will allege that Cbus did not take appropriate action when it was warned about the widespread failures – covering as many as 10,000 claims – and that people still may be waiting for payouts. If established in court, the charges against Cbus carry “very significant maximum penalties”, Ms Court said.

The fact all of Cbus’s alleged failures have ­occurred while Mr Swan has chaired the fund since 2022 raises difficult questions for Labor. For now, Mr Swan’s political colleagues are standing by him; but with an election looming, their longer-term attitudes remain to be seen. When he was the federal MP for the seat of Lilley on Brisbane’s northside, Mr Swan styled himself as a consumer advocate, running a “grocery watch” scheme and handing out advice to shoppers. He would have been a scathing critic on behalf of superannuation policyholders had such an alleged scandal arisen when he was an MP.

The allegations also have drawn attention to the governance of industry funds, which are a sinecure for retired politicians and lifelong trade union officials and business delegates. Cbus is a major donor to unions and contributes to industry groups. Its links to the discredited CFMEU are also a problem. In August, the Australian Prudential Regulation Authority ordered Cbus and the Queensland-based BUSSQ fund to review whether their CFMEU-appointed directors were fit to hold their positions. Three directors with CFMEU connections later left the Cbus board. As Eric Johnston notes, despite industry funds long hiding behind a soft not-for-profit image, regulators now rightly see them as fair game, like any bank or profit-driven retail fund. The case being brought by ASIC against Cbus is the first of its kind. But the wider probe could have a big impact on industry funds, which are a major part of the nation’s $4 trillion superannuation sector.