Cherelle’s husband died suddenly. It took a year for her to access his super

When Cherelle Bailey unexpectedly lost her husband four years ago, she found it took almost a year before his three superannuation funds released his money. She is one of a growing number of Australians facing long delays to claim death benefits and insurance.

The number of complaints to the Australian Financial Complaints Authority about delays in claims handling has more than doubled in the past year for insurance within super, and more than tripled for release of the member’s super balance to their beneficiaries.

Cherelle Bailey had to battle with the super funds for them to pay out her late husband’s balance.Credit: Flavio Brancaleone

For Bailey, who lives in Balmain, dealing with the super funds made a difficult time much worse. Her husband Dave died from cardiac arrest at age 52, leaving behind Bailey and their teenage daughter.

“We went from a two-income family down to one income, and I had a 13-year-old daughter who lost her nana and dad within a space of seven weeks, and we’d all lived together,” Bailey said.

“I had debts to pay … so there was the financial aspect, but my bigger challenge was trying to get my child to survive her year and realise that she could survive and get through it.”

Dave Bailey died without a will. To get probate, Bailey had to wait for the coroner’s report and letters of administration from the NSW Supreme Court, a process that took months and thousands of dollars in legal fees.

Cherelle and Dave Bailey on their wedding day in 2005.

It then took the super funds another five months to decide to award his super and life insurance payout to Bailey.

The Bailey family had lived in a multi-generational household with Dave’s mother and brother. As a young man, Dave had nominated his mother as his beneficiary on one of the funds, and failed to update it when he married. This was moot since his mother died seven weeks before him, but the funds raised the prospect that Dave’s brother might be entitled to claim the super because he lived at the same address. (He did not make a claim.)

Bailey recalls after getting the letters of administration in February, she spoke to her solicitor at least once a week until May to try to get the super sorted, and every conversation “brought it all up”.

Figures from the ombudsman show superannuation complaints overall were up by a third to 6957 in the financial year ended June 30, 2023.

One in four of those complaints was about delays in claims handling for insurance within super – this was up 136 per cent to 1738 complaints.

Complaints about death benefits (release of super) totalled 267 complaints – an average of 22 a month, compared to 72 or six a month – in the previous year.

The lead ombudsman for superannuation at the complaints authority, Heather Gray, said super funds should pay promptly to reduce financial and emotional stress for the beneficiaries.

“There might be a surviving spouse who was very reliant on that person’s income, or there might be dependent children, there might be a number of people who are relying on that death benefit to be paid to them, and if there is a delay, they can suffer significant financial hardship,” Gray said.

“A delay is always upsetting, always frustrating and always difficult for the people who are left behind.”

Superannuation is not covered by a will. The fund trustee has discretion to award the member’s super balance and any payout from insurance held within the account to eligible beneficiaries, unless the member has made a valid binding death nomination for who should receive their super.

Gray said delays often occurred when there was no valid binding nomination and a complex family situation.

She had asked super funds to explain the increase in delays, and was told they were suffering staff shortages and also dealing with delays by third-party administrators or insurers.

The Association of Superannuation Funds of Australia deputy chief executive, Glen McCrea, said 92 per cent of death benefit claims were paid within two months of being lodged and 99 per cent within six months. These were figures from the Australian Prudential Regulation Authority.

How death benefits in super work

• When a person dies, super funds will pay their balance and any insurance payout to the beneficiaries.
• Unless there is a valid binding death nomination, the super fund trustee has discretion to determine the beneficiaries based on eligibility criteria.
• Super fund members can make a binding death nomination, which the trustee must honour as long as the beneficiary is eligible. This is separate to a will.
• Without a valid binding nomination, the superannuation fund needs to let the potential beneficiaries know how they propose to pay the death benefit, and those people then have 28 days to accept or object to the decision.
• The process for identifying the potential beneficiaries and determining the allocation of the payment can be complex, especially if there are blended families, children and ex-spouses involved. 

Tony Savva, from Ryde, had a similar experience to Bailey, but it took even longer.

Savva received the last payment from his wife’s super fund more than two years after her death from breast cancer in 2019 at age 49.

His wife had nominated Savva as her beneficiary for super, but had not completed the paperwork to make this binding. The two older children, who were young adults, had to formally relinquish their claims.

“I get very upset with the bureaucracy,” Savva said. “You comply with one instruction, and then they turn around and change their mind: ‘oh no, that person told you the wrong thing, you’ve got to do something else, oh you don’t need to fill that form out, you needed to fill this form out.’

“I’m grieving for my wife, I’m trying to look after my children, I’m trying to look after my house, and [they’re] just compounding things on top of it.”

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