How to fast-track a super death benefit claim as ASIC steps in

If you've ever had to navigate a superannuation death benefit claim (essentially, the leftover money paid out from someone's super fund after they pass away) you'll know it can be a confusing time. 

Now, a landmark investigation by the Australian Securities and Investments Commission (ASIC) has found that many super fund trustees are dropping the ball, causing unnecessary hardship for bereaved families.

ASIC reviewed 10 major superannuation trustees – covering nearly 40% of all Aussie super savings – and found some serious problems. Shockingly, none of the funds checked were properly tracking how long it took them to handle claims from start to finish.

What did ASIC find about death benefit claims?

The review uncovered a long list of failings, including:

• Excessive delays: Some funds are taking far too long to process claims. In 78% of the claim files ASIC reviewed, delays were caused by issues within the trustee's control. 
• Poor customer service: In over a quarter (27%) of reviewed claims, customer service was unacceptable. People reported phone calls not being returned, queries being dismissed, and being asked for unreasonable information.
• Confusing processes: Trustees often had unclear or inconsistent internal processes, making things harder for claimants.
• Insensitive communication: Communication was often described as "ineffective and insensitive”.
• Lack of support: There was inadequate support, particularly for First Nations claimants or those experiencing vulnerability. One woman waited more than 500 days for a $100,000 payout after her husband died, with the trustee failing to respond to her concerns about financial hardship.

ASIC Chair Joe Longo didn't mince words, stating the issues stem from leadership "that doesn’t have a grip on the fund’s data, systems and processes," leading directly to customer suffering.

How ASIC is responding to the problems

It's clear ASIC means business, putting trustees on notice by issuing an exhaustive and detailed list of 34 directives across 13 focus areas covering performance monitoring, better documentation, staff training, and perhaps most importantly, better communication and responsiveness to people's feedback and complaints. The full list is available in ASIC's report.

ASIC will be actively reviewing the progress funds make to ensure they're prioritising the needs of members and their beneficiaries. 

They've also shown they're willing to take legal action against funds failing to meet standards, having recently launched court proceedings against major funds like AustralianSuper and Cbus over alleged claim delays.

Who gets the super when someone dies?

It often surprises people, but super money doesn't usually get handled by a person's will like their house or bank account might. Super is held in trust, so the fund has to follow super laws, not just the will. The first thing the fund looks for is whether the person left specific instructions (a 'binding nomination'). If there's a valid one, the fund typically must pay the super to the eligible people listed on that form.

What if there isn't a valid binding nomination? Then it's up to the trustee (the people running the fund) to decide who gets the super, following the law. They'll look for dependents like a spouse, child or someone financially reliant on the deceased. The super might go to the person's legal estate only if dependants can't be found, or in some other limited situations. If it is paid to the estate, then it gets distributed according to the will.

This is clearly a lot of work for super funds. Perhaps that's why some funds have let it slide when they're busy focusing on getting new members, providing financial advice and chasing returns. Nonetheless, getting this right is still their responsibility, and thankfully ASIC is now focusing on ensuring they meet it.

Tips for claiming a super death benefit

While change is clearly coming after this report, it won’t happen overnight - and some people don’t have time to wait. If you’re already in the middle of a claim (whether you’ve been nominated or you’re hoping to be considered), here’s how to help light a fire under your fund’s you-know-what:

• Send documents early. Most funds need a death certificate, ID, and something proving your relationship to the person who died. If you’ve got them, send them now. The sooner they have what they need, the sooner they can start moving on it.
• Keep records. Note who you spoke to and when. Save everything you send. If you hit a delay later, you’ll be able to refer back to it without starting from scratch.
• Follow up and ask direct questions. If you haven’t heard back or a deadline has passed, get in touch. Ask where the claim is at, when payment will be made, and what’s still holding it up. If the person you’re speaking to doesn’t know, ask who does.
• Understand the slow parts. If there’s no binding nomination, the fund has to work out who gets the money. That can take time, especially if others are involved. But you can still ask how the decision is made and when a final call is expected.
• Lodge a complaint. If you’ve sent what’s needed and still can’t get a straight answer or payout, lodge a complaint with the Australian Financial Complaints Authority who will look into it for free.

Accessing a legitimate super death benefit shouldn’t have to add another layer of grief on top of an already stressful situation. With these tips in mind, and the ASIC working on more permanent fixes, hopefully this aspect of super will become less of a burden going forward.

Experiencing similar frustration with your own fund? Maybe it’s time to compare some of these other options we’ve curated here at Mozo:

Vanguard disclaimers: 

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