Fund faults emerge amid super crackdown

Australian Prudential Regulation Authority chair John Lonsdale has weighed in on the superannuation scandal involving Cbus, demanding a deeper probe.

APRA chair John Lonsdale. Picture: John Feder

Australia’s $4 trillion superannuation industry faces a crackdown from the financial regulator after a week of damaging allegations about industry fund Cbus, with a leading industry lawyer calling for a code of conduct to be adopted amid fears of bad governance.

A Federal Court case this week alleged Cbus mishandled $20m worth of claims for grieving families and vulnerable people, triggering criticism from regulators and business leaders over broader problems plaguing the industry.

All industry funds are under the spotlight after ASIC deputy chair Sarah Court this week said it appeared the sector’s delays in awarding insurance payouts was broader than Cbus alone, and added that ASIC was “doing a deep-dive surveillance”.

Australian Prudential Regulation Authority chair John Lonsdale weighed in on Friday, demanding a deeper probe, while big business said a “stress test” of the sector’s co-dependency with banks should be expanded to infrastructure and energy.

Berrill & Watson Lawyers director Paul Watson said the super funds sector currently does not have a code of practice or code of conduct like other financial services like banks and insurers.

“Up until June 2021 there was a thing called the voluntary super code of practice and it was specifically designed to ensure super funds had certain obligations in their role in the insurance claims,” he said.

“The industry walked away from the code when they shouldn’t have and they put in place guidelines (that were) completely ineffective in holding anyone to account.

“What we think is necessary here is a code of conduct that not only covers insurance but also more broadly covers a set of service standards that everyday consumers can rely on and that super funds can abide with.

“Super is a massive asset for anybody so it’s important that when people are dealing with their super fund when they have a complaint they need to understand what the process is.”

Carol (who does not want her last name revealed) said after the death of her sister in August 2021 from cancer it took 19 tortuous months to receive a payout from AustralianSuper.

She lays the blame squarely with AustralianSuper, which manages more than $300bn of members’ retirement savings.

“There’s thousands of people out there like this. I can tell you that when I put a post up on the AustralianSuper Facebook page saying we had trouble getting our money, there were so many comments,” she said.

“There were people who said ‘Oh my God, my husband died six months ago and I can’t get the money and I’m about to lose the house’. There are all these stories like that out there.”

Carol, with her elder sister Sandy being the executor, were initially told by AustralianSuper that it was very simple.

“They said they didn’t need probate, something we questioned at the time,” said Carol who lives in Hobart.

“We lodged it before Christmas and nothing happened and nothing happened. In the new year in 2022 we chased and chased and they changed the goalposts about 20 times. They ­finally agreed we needed probate to get the money.

“So we lodged it in May 2022 and still couldn’t get any answers. We rang them and you go onto their telephone system and we’d be there for hours … it’s just ridiculous.”

Carol said she went through the official complaint process and also emailed AustralianSuper chief executive Paul Schroder in late January 2023.

“They got back on the seventh day. He never came back to us. I was quite tough in my email and he never responded to me. They said they fixed it and blamed staff and delays and seven weeks later they still hadn’t fixed it so I sent another email in March to him so we had our money in five days,” she said.

“We didn’t need any of this to run a home but some of the stories that came up when I put up the Facebook post were horrific. People were going to lose their homes.”

Carol said what angered her most was that Mr Schroder never contacted her.

“He didn’t have the guts to say ‘oh Carol this is terrible’,” she says. “It’s a really sad time and you’re also dealing with multiple other issues with bank accounts and the whole paperwork for someone who passed away is huge.

“Kathy’s bank when she passed away paid the money to the estate within seven days. If a bank can do it why can’t a super fund?”

AustralianSuper chief executive Paul Schroder.

An AustralianSuper spokesman said they unreservedly apologised for any distress caused in this specific case.

“Managing death claims with empathy and efficiently is the final service we can provide members, and we take this responsibility extremely seriously,” he said.

“We know that sometimes members and their beneficiaries have not received the service they expect and deserve, and we are sorry for that. We would never intentionally delay a death claim payment.”

The spokesman said the fund saw a significant increase in death claims during the Covid pandemic, which caused a backlog and it appears, unfortunately, this case was affected by that.

“Over the last 18 months we have streamlined the process for members’ beneficiaries and increased our resources to manage these important claims,” he said.

“As we announced in December last year, we have now brought the management of death claims in house with the establishment of our dedicated Bereavement Centre. We currently have 75 people in our Bereavement Centre and internal Member Resolution team, with more roles currently being recruited.

“Our aim is to resolve most death claims within four months from the date we receive the first claim form. Currently, 70 per cent of claims are dealt with in this time frame.

“We know that we have not always got everything right with this process, which is why we have taken action. Over the past 18 months we have responded to this challenge and will continue to do all we can to improve our service and support for members and their loved ones.”