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AustralianSuper sued for death benefit claims failures
The Australian Securities and Investments Commission (ASIC) has launched additional action against AustralianSuper in the Federal Court, this time over delayed processing of nearly 7,000 death benefit claims.
ASIC is alleging that between July 2019 and October 2024, AustralianSuper took up to four years from the date the claim form was returned to assess at least 6,897 death benefit claims. ASIC says that it was a failure to process death benefit claims efficiently, honestly and fairly.
It also alleges AustralianSuper failed to pay benefits as soon as practicable after the member’s death in at least 752 cases, in one instance taking up to 1,140 days to pay, despite having all the relevant information required to make the payment.
“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.”
The new ASIC action comes less than a month after AustralianSuper was fined $27 million after the Federal Court found it failed to merge multiple member accounts in breach of its fundamental duties and obligations to members.
In that case, the court found that over the nearly ten years to March 2023, approximately 90,700 AustralianSuper members had multiple accounts and incurred approximately $69 million in losses through multiple administration fees, insurance premiums and lost investment earnings as a failure of those funds not being merged.
“Improving services to superannuation fund members is a strategic priority for ASIC and we will continue to take strong action where we consider that members are not getting the service they deserve from their superannuation trustees,” Court said.
Australia’s super system punches above its global weight
Australian’s superannuation savings are forecast to become the second-largest pool of global retirement savings by 2031, according to analysis by the Super Members Council (SMC).
Super funds, including SMSFs, recently reached $4.1 trillion in assets, making the pool of funds larger than any single Sovereign Wealth Fund in the world.
“Australia has the fastest growing super system globally — twice the rate of international peers,” SMC chief executive officer Misha Schubert said.
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“Super is a great Australian success story. It gives millions of everyday Australians the chance to live the life they want in retirement, while saving the Budget money over the long term. It’s a win-win.”
The analysis also found that Australia is the only OECD country where spending on government-funded pension payments is falling and will continue to fall, dropping from 2.5% of GDP currently to 2.0% by 2060. The average proportion of GDP spend on pensions across the OECD is 9.3%.
APRA lifts standards for super fund trustees
In its most significant update to governance standards for more than a decade, the Australian Prudential Regulation Authority (APRA) has proposed eight measures to strengthen its prudential governance framework for banks, insurers and superannuation trustees.
“While overall standards of governance have improved over recent years, we still see areas of weakness, including entities treating compliance with some requirements as a box-ticking exercise,” APRA chair John Lonsdale said.
The proposed changes include a lift in requirements for boards to have the right mix of skills and experience and raising minimum standards around the fitness and propriety of responsible persons. But potentially of the most significance to super fund boards, is the proposal to introduce a lifetime tenure limit of 10 years for non-executive directors at an APRA-regulated entity. This will impact a number of serving directors on superannuation trustee boards.
The Association of Superannuation Funds of Australia (ASFA) welcomed the release of the new proposals and said it looks forward to engaging with APRA to ensure the sector continues to align with industry best practices.
“Australia’s superannuation sector manages close to $4.2 trillion of super contributions to help members achieve a dignified and enjoyable retirement. That’s a huge responsibility and one trustees take very seriously, so we have always been keenly focused on ensuring funds are well governed and best prepared to navigate uncertain times, to deliver the best returns for members,” ASFA chief executive officer Mary Delahunty said.
Super leaders meet with the Trump government
A group of leaders of Australian super funds recently met with US dignitaries to discuss further investment opportunities for super funds in the US. The Australian Super Summit heard from two Trump cabinet secretaries, three state governors and leading investment and business leaders.
Those attending said the summit was an important opportunity to build awareness of the size of Australia’s superannuation savings pool, which may not have been understood prior to the summit.
Currently, Australian super funds have combined investments of $US400 billion in the US across both listed and unlisted markets, which is projected to grow to $US1 trillion by 2035.
The summit was largely organised by Australia’s US ambassador, Kevin Rudd, and Australia’s consul-general in New York, Heather Ridout.
“In the US, through their super funds, Australians are now regarded as among the biggest and most sophisticated investors in the world,” the Super Members Council, ASFA and Industry Funds Management said in a joint statement following the summit.
Morningstar boosts focus on governance in super ratings
Morningstar Australia has increased the weighting of governance in its super fund ratings and is also increasing the universe of funds it plans to cover.
Morningstar’s Medallist Rating methodology will now include a 25% weighting to governance (up from 10%), a 25% rating to people and a 50% weighting on investment.
Morningstar director of manager research ratings, Matt Olsen, said the increased weighting of governance was in recognition of the important role played by trustees in the management of super funds.
Olsen said Morningstar’s Medallist Ratings focus on investment and differentiated their analysis from other super fund ratings.
“Morningstar has got strengths in a range of areas, in our ability to collect data globally and compare different peer groups of like types of investments in the multi-asset space,” Olsen said.
The research agency has expanded its superannuation research team as it beefs up its coverage.
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Insurance cover through super grows
The number of Australians protected by life insurance through their super grew to 8.8 million in the year to June 2024, compared to 8.5 million the year before, according to new research by ASFA.
“ASFA’s research shows superannuation is not only helping Australians achieve a dignified retirement, it is also protecting millions of people who would otherwise fall through the net,” ASFA chief executive officer Mary Delahunty said.
The research paper, entitled Providing cover to those who need it: The success of insurance in superannuation, analysed historical opt-in rates of life and total and permanent disability (TPD) insurance and compared it with current levels of coverage Australians have through their super. It concluded that insurance in super provides protection for 6 million Australians who would otherwise be uninsured.
It also found that 8.1 million Australians were covered for total and permanent disability through super last financial year, up from 7.6 million the year before.
A total of $1.7 billion in death benefit payments and $3 billion in TPD payments were made by super funds in 2023–24, while the paper also noted improved claims handling timeframes.
Between 2023 and 2024, the average time taken to finalise TPD claims came down from 4.9 to 4.4 months and from 2 to 1.6 months for Disability Income Insurance. Nearly three-quarters (72%) of death benefit claims were finalised by insurers within two months, with only 1% taking longer than 12 months to complete, the research found.
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