AustralianSuper sued over death benefit delays

Australia's largest super fund is being sued by ASIC over the delayed processing of close to 7000 death benefit claims, with some beneficiaries left waiting four years for a payout.

The regulator has commenced federal court proceedings against AustralianSuper, alleging the fund failed to process death benefit claims efficiently, honestly and fairly between July 2019 and October 2024.

In November 2024, AustralianSuper undertook a remediation program, paying $4.2 million to about 7000 beneficiaries whose claims took longer than the fund's internal target handling time of four months from when the completed claim form was received. Then, in February, it was confirmed ASIC was investigating the fund over the failure.

According to ASIC's filings, the $355 billion fund took between four months and four years from the date the claim form was returned to assess at least 6897 claims. This number does not include any claims made during the period that were still open as at 22 January 2025.

In 941 instances, the member held a valid binding death benefit nomination (BDBN) at the time of their death.

The fund also failed to pay benefits as soon as practicable following a members' death in 752 instances, it's alleged; 555 of these members held a BDBN.

"In one case, despite having all the information required to pay the benefit, it took AustralianSuper 1140 days to make the payment; others took 438, 412 and 366 days," ASIC said.

In 254 cases, AustralianSuper took between 15 and 213 days to provide the claim form.

AustralianSuper's administrator is MUFG Pension and Market Services, previously known as Link Group.

According to court documents, AustralianSuper was made aware of a backlog in death benefit claims in November 2020 but, ASIC said, "failed to take prompt and appropriate action to prevent and redress the backlog, including by its failure to... terminate its arrangements with Link... cease charging monthly administration fees from the deceased member's account during periods of unreasonable delay... and/or provide suitable and timely remediation to claimants adversely affected by the backlog."

The regulator found AustralianSuper did not maintain a central repository of claims data and documentation on a member basis, and could not provide the data required to assess delay in most cases without undertaking a manual file review. For 941 BDBN files received, the data required to accurately assess the delay was only available for 218 of those claims, ASIC noted.

"At its heart, this matter is about protecting vulnerable Australians and their families," ASIC deputy chair Sarah Court said.

"It is vital that death benefit claims are processed in a timely manner. Delays are likely to cause further pain and anxiety to people who are already suffering from grief, making what is already a difficult time even harder."

In response, an AustralianSuper spokesperson said the fund is considering ASIC's claim carefully and will respond in due course.

"Paying out members' retirement savings after they die is the final service we provide them. During COVID, a sharp increase in member deaths and a significant impact of the pandemic on staffing numbers saw a backlog relating to the processing of death claims emerge," the spokesperson said.

'We recognised this and developed a strategy with our service provider to clear the backlog of claims. Despite some improvement, we were not satisfied the backlog was reducing fast enough so we made the significant decision to bring the processing of death claims in house. Bringing this function in house strengthens our ability to deliver this important service efficiently and empathetically.

"AustralianSuper is fundamentally transforming how we deliver member services. We are part way through a $120 million investment in service improvements, including bringing operations in house that require high care and empathy."

As part of this, in April 2024 the fund launched an internal Bereavement Centre with 75 dedicated case managers for handling claims.

AustralianSuper said it has since seen claims processing times reduce significantly.

Member services failures are an enforcement priority for ASIC.

It recently filed a similar case against Cbus. In that case, ASIC alleges about 10,000 members were impacted by delays to death and TPD claims processing, with some waiting more than 12 months for a payout.

Meantime, this action against AustralianSuper follows it being ordered to pay a $27 million penalty after ASIC sued it for failing to merge multiple member accounts, a case that impacted more than 42,500 members.

Member services are also in the crosshairs of the government. Earlier this year, Treasury announced it would introduce mandatory minimum service standards for all large APRA-regulated funds.

These include the timely and compassionate handling of death benefits, fair and efficient processing of insurance claims, and clear, respectful and accessible communications with members.