The Australian Securities and Investments Commission (ASIC) has warned superannuation funds to improve their handling of death benefit claims after uncovering systemic failings across some of the country's largest funds.
Excessive delays
The corporate regulator's latest review found that excessive delays, poor customer service and ineffective claims handling practices have left grieving families without timely access to funds at critical times.
ASIC’s two-year investigation, covering 10 superannuation trustees responsible for 38% of APRA-regulated member benefits, found widespread issues across the sector.
Although major funds Australian Super and Cbus were excluded due to ongoing legal action over alleged delays, the review still revealed significant gaps in governance, transparency and care.
ASIC noted that not a single fund reviewed had adequate systems to track end-to-end claims processing times.
In nearly half of cases, delays were due to internal fund processes, with vulnerable claimants often receiving inadequate support.
One case highlighted by ASIC involved a First Nations woman who waited more than 500 days for a A$100,000 death benefit payment, with no assistance from the trustee despite her financial hardship and difficulties navigating the system.
Another claimant described how delays and lost paperwork meant her family waited more than a year to receive a benefit from Australian Super following her brother’s death.
Leadership failure
ASIC chair Joe Longo said the findings reflected a leadership failure, noting many boards lacked a clear understanding of how their claims processes were performing.
Commissioner Simone Constant added that delayed payments can cause serious harm, denying beneficiaries the means to cover funeral expenses or meet basic needs like rent, food, and medical care.
The review also found that trustees often shifted members' account balances and insurance proceeds into low-yield cash investment options during processing, potentially eroding returns.
ASIC criticised ongoing fees charged during claim processing, including for financial advice and insurance premiums.
Following the review, several funds have pledged to improve their processes. Australian Super said it has introduced 75 dedicated case managers and has reduced claims processing times. ASIC confirmed it will monitor trustees’ progress and warned that further enforcement action could follow.
The findings are part of a growing scrutiny of Australia’s A$4 trillion superannuation sector, with complaints rising and a Senate inquiry calling for an industry overhaul.