For Australians, superannuation is the nest egg to rely on for a comfortable retirement, and for many, it represents a lifetime of hard-earned savings.
However, the superannuation industry, which is worth a staggering $4.1 trillion, has recently come under intense scrutiny after a series of service shortcomings and delays in paying out death and disability claims, which have left many Australians without help or support.
Recognising the gravity of these issues, Finance Services Minister Stephen Jones has announced a series of ‘long overdue’ reforms aimed at overhauling the superannuation sector, which will be backed by enforceable legislation.
The first order of business in this sweeping reform is to address the slow pace at which death benefits and other insurance claims are processed. Improving communication with members is also high on the agenda, as fund members must be kept in the loop regarding their investments and entitlements.
Minister Jones has been vocal about the need for improvement in the past, but he is now making it clear that the current service standards are ‘nowhere near where they needed to be.’ Workers, he asserts, deserve better from their super funds.
‘[The] simple message to funds is we’ve just got to get better. You’ve got to get better at the way that you are dealing with your members,’ he said.
The urgency of these reforms was highlighted when the corporate watchdog Australian Securities and Investments Commission (ASIC) took legal action against industry super fund Cbus. The fund was accused of failing to process over 10,000 claims for death and disability payments promptly, with estimated losses to members amounting to $20 million.
ASIC’s deputy chair, Sarah Court, indicated that this might be indicative of a ‘broader issue’ within the industry, prompting the watchdog to reach out to several funds with its concerns.
In a move that underscores the seriousness of these issues, AustralianSuper, the country’s largest super fund, announced it would repay $4.2 million to around 7,000 customers as compensation for undue delays in processing death benefit claims.
Xavier O’Halloran, CEO of Super Consumer Australia, noted that the recent scandals have brought to light the industry’s customer service failings.
‘Super funds have been taking far too long to do basics like pick up the phone and pay people the money they are owed. Huge delays [in] payments at some super funds were forcing people to struggle with their day-to-day living costs and debts,’ he said.
The Association of Superannuation Funds of Australia (ASFA) and its CEO, Mary Delahunty, have welcomed the reforms. Delahunty said that ASFA has been proactive in working with its members to identify ways to enhance the consumer experience, particularly concerning death benefit claims.
CPA Australia has also chimed in, calling the standards ‘long overdue.’ Richard Webb, the superannuation lead at CPA Australia, emphasised that ‘insurance and death benefits are key features of superannuation which have routinely been forgotten about.’
Meanwhile, the government has committed to collaborating with consumer advocates, regulators, and stakeholders to develop these new standards. Draft standards will be released for public consultation, although a specific timeline has not been set.
For our readers at YourLifeChoices, we invite you to share your superannuation stories with us. Have you experienced delays or poor service from your super fund? How do you feel about these proposed reforms?
Your insights are valuable, and by sharing them, you contribute to a broader conversation that could shape the future of superannuation in the country.
Also read: After a lifetime studying superannuation, here are 5 things I wish I’d known earlier
Good afternoon,
I have today read your article on superannuation in today’s edition.
In the article it was mentioned Your Life Choices would be interested in hearing about readers experiences. I did not see an email to forward too.
I have previously submitted a couple of items to you which were published.
I had a very poor experience with REST and the matter was referred to the Australuan Financial Complaints Authority ( AFCA).
My problems with REST were around several things. I did receive a TPD payment, but before that I had also lodged a couple of Income Protection Claims.
I had been a pedestrian struck by a motor vehicle many years ago, since that event, I have experienced chronic back pain. I had cover of several thousand dollars per month, but was paid only about $1100.
I had returned to work and started at 4 hours building up to about thirty hours. I struggled again and was forced to leave work. The insurer applied an average hours clause. They used this to reduce the claim.
My work hours were at 33 hours per week, as part of my permanent role. I was paying the premium on the higher amount. I did seek to return to work, so followed a RTW program. The insurer and REST used the RTW against me, by using the average.
I had been informed in error that I was covered until age 60. I had an older policy and the income protection stopped after a couple of years. AFCA upheld the decisions.
Another complexity involved Centrelink payments, As we all know, any one receiving an income support payment including Jobseeker, Pension or Sickness benefit has to report that income to them. Rest and their insurer were going to reduce the payment by the Centrelink benefit. A strange situation. It would mean that I would have had to report that reduced insurance payment then to Centrelink for them to adjust their payment. A payment from Centrelink would have to be reported. In the end Rest waived the requirement and I reported their payments.
There were other issues too. AFCA is supposed to be a mechanism to help resolve disputes without the need to use the legal system. It’s unfair. I was a consumer representing myself.
The insurers use lawyers, actuaries and outsource work. The insurer outsourced my case to a Sydney law firm HWL Ebsworth who were advising them in the AFCA matter.
I was unaware of this, until I was informed that HWLE had been involved in a cyber attack. Information accessed included TFN Medicare, Banking, Income, Health Information.
It’s an unfair fight. Legislation is called for here.
When individuals are claiming this means there has been a loss, loss of life, loss of a loved one, loss of job, loss of hours. They are vulnerable.
Rest had been cross examined before the Hayne Royal Commission.
After caring for my wife for many years through her dementure I did not pay enough pay enough attention to the super industry and superannuation itself.
I am appalled at the behaviours of several of the boards,the lack of eyesight by Govt on the industry and the lack of consideration as to who is the customer.
My observation of the industry is that it is so busy looking inward they have lost touch with their clients.
For the govt to have to regulate what is just normal business principles is a shame on the industry.
Too much focus on woke ,decisions like DEI and green principled investments rather than the fairnesses or lack of with their customers in relation to inheritance tax.
Superannuation is no longer a lifetime product when one has to predict their death and cash out the super to avoid an unfair inheritance tax. especially for those over 75.
Cheers.
What are you talking about? There is no DEI policy in Australia. Additionally there is no inheritance tax. Where are you located?
Just to enlighten you.
“How to calculate tax on super death benefits to non-dependants ATO?
If all of the beneficiaries that have benefitted or may be expected to benefit from the lump sum death benefit are not dependants, you will be subject to tax on the taxable component of the benefit at the rates of 15% for the taxed element and 30% for any untaxed element.”
The recommendation is, if you are in demise, then to withdraw all your balance in your superannuation account (assuming you are in pension phase) and then the amount automatically becomes part of your Estate. This applies to the last surviving member of the fund only.
Thankyou taragosun.
That may enlighten Des.
I will try and make it easy.
My wife has passed so I have no dependants for tax dept purposes.
If I pass ,the tax accumulated on superannuation income earned in my retirement phase will be paid by the Estate.
In my case the tax,which is described by the financial adviser industry as basically an inheritance tax will be 15%.
I have deliberately made the super paid to the estate not my adult children as the estate does not pay the Medicare tax.
The only way to not pay the accumulated tax is to withdraw all superannuation prior to death and put it in savings.
However if I was under 75 there is another option available.
Hope that helps.
In regard to dei I can only recommend continued research into the discussions that are continuing between industry and Govt.
Cheers,hope I have been able to explain the above issue in an easier way.
I am very familiar with the agecare/tax issues but perhaps my explanations are a bit unclear.
Cheers
‘When reading this story it reminded me of an issue that may be of interest. My fund REST has a binding or non binding clause that you have to revisit every 3 years.’
‘There are no reminders and I feel a lot of people won’t know about this clause and there are no reminders about binding and non-binding which I feel could probably be one of the reasons that the funds can keep your money as long as they want with no explanations.
‘I only found out about it because I was a union delegate and I attended a training course which they went into a great detail about the binding and non-binding clause.’
– sent in by Gai H.