‘Behind every claim is a grieving family’. Death benefits inquiry demands change but lacks penalties

When Lisa’s husband passed away unexpectedly, she assumed accessing his superannuation death benefit would be straightforward. Instead, she spent months navigating a bureaucratic maze.

She repeatedly sent documents, waited weeks for callbacks and struggled to get answers from his fund.

Her experience is far from unique. A damning new report reveals systemic failure by Australia’s A$4 trillion superannuation industry in handling members’ death benefits.

A system in disarray

The Australian Security and Investments Commission’s landmark review of ten major super trustees, managing 38% of super assets, exposes an industry that is not serving its members.

Grieving families routinely face excessive delays, insensitive treatment and unnecessary hurdles when trying to access death benefits. It found they sometimes waited over a year for payments to which they were legally entitled.

The central problem was a fundamental breakdown in claims processing, with five critical failures exacerbating inefficiency and distress.

1. Poor oversight

No trustee monitored end-to-end claims handling times, leaving boards unaware of how long families were waiting. While the fastest trustee resolved 48% of claims within 90 days, the slowest managed just 8%.

In one case, a widow waited nearly a year despite her husband having a valid binding nomination. ASIC found 78% of delays stemmed from processing inefficiencies entirely within trustees’ control.

2. Misleading and inadequate information

Many funds misled on processing times and masked extreme delays. Boards often received reports only on insured claims, despite most death benefits not involving insurance. This meant boards were unable to fix systemic problems.

3. Process over people

Risk-averse procedures often overrode common sense. Many funds imposed claim-staking – delaying payments for objections – even for straightforward cases, adding a median 95 day delay.

Communication failures further compounded delays, with claimants receiving inconsistent advice and few or no status updates.

4. Outsourcing without accountability

Claims handled in-house were processed significantly faster than those managed by external administrators. Only 15% of outsourced claims were resolved within 90 days, compared to 36% of in-house claims.

The securities commission is calling for stronger oversight. External administrators significantly slow down responses, so some funds may need to bring claims processing back in-house to ensure efficiency.

5. Lack of transparency

Many funds failed to provide clear timelines or explanations for delays and had no accountability mechanisms.

The ten funds investigated include the Australian Retirement Trust, Avanteos (Colonial First State), Brighter Super, Commonwealth Superannuation Corporation, HESTA, Hostplus, NM Super (AMP), Nulis (MLC), Rest and UniSuper.

Two others, Australian Super and Cbus, are being sued separately by ASIC for either failing to pay out or delaying payments to thousands of eligible beneficiaries.