Some super funds charged fees to deceased members
Some superannuation funds have continued to deduct insurance premiums and financial advice from deceased member accounts.
The practice has been revealed in the Australian Securities and Investments Commission’s damning report on how superannuation funds have been handling death benefit claims, REP 806.
In an observation reminiscent of the criticism directed at financial planning firms which continued to charge dead clients, the ASIC report said that while it did not collect data about fees charged as part of its review, it did note what might be a common practice.
“We understand that it is common for trustees to continue to charge administration fees and investment fees, but one reviewed trustee is reconsidering this policy,” the ASIC report said.
“Trustees should not continue to deduct insurance premiums or financial advice fees while processing a death benefit claim,” it said.
The importance of ASIC REP 806 is that it is based on a review of 10 significant superannuation funds traversing all three sectors of the superannuation industry – industry, retail and corporate superannuation funds.
When it came to claims handling time-frames, the report found that none of the superannuation funds actually managed to meet 100% completion during the review period.
“Overall, there was significant variation in claims handling times across the reviewed trustees,” the report said. The fastest trustee closed approximately 48% of death benefit claims within 90 days whereas the slowest trustee closed only about 8% in that time.
“The fastest trustee had closed approximately 75% of its death benefit claims at 180 days, whereas the slowest trustee had only closed approximately 47% of its claims.”
Importantly, the report indicated that funds which handled death benefit claims internally turned in better performances than those which outsourced the process.
“Trustees that processed claims internally or with a related-party service provider (insourced trustees) closed 36% of claims in 90 days in comparison to trustees who processed claims with a third-party service provider (outsourced trustees), who closed 15% in 90 days,” the report said.
Superannuation fund representative group, the Association of Superannuation Funds of Australia (ASFA) responded to the ASIC report with a formal apology from its members, with its chief executive, Mary Delahunty saying the sectors “knows we have let down some of our members and their families”.
However, ASFA said funds had already taken the criticisms on board and good progress was being made in improving claims handling – something that was being reflected in a reduced number of complaints lodged with the Australian Financial Complaints Authority (AFCA).
ALL super funds charge fees to deceased members. So do telcos, energy companies, subscription software companies, gyms, and every other service provider that automatically deducts an onging fee for their service. Because they don’t immediately know the person has died!
The important issue is not whether a service provider charged fees to dead people, it’s whether they have an appropriate process for terminating the service and refunding fees where appropriate, once they receive confirmation the person is dead. They never find out straight away, and often won’t for some time. The only service providers who know immediately their client has died are hospitals. (And maybe gyms if the client carks it mid workout!).
This whole “charging fees to dead people” was one of the hysterical media exaggerations from Hayne’s circus, that empowered him to impose ridiculous bureacratic rules that have made it much harder for consumers to access professional financial advice.
Mike, please don’t repeat the mistakes of the past with misleading and deceptive headlines like this.
If you read the actual report it cites the number of days “after” being notified of death. So, in these cases these Industry Super Fund were indeed, “informed” and notified of the members death, but continued to deduct insurance premiums and took a significant time to pay up.
This is a clear case of poor processing systems, lax member service, yet again continually impacting members, with sub par service standards associated with Industry Super Fund.
Industry Super Fund Trustees not doing their jobs to oversee payment of Super Death benefits.
Zero Industry Super Fund trustees held to account, fined, named & shamed or banned.
And as is always the case, ASIC & Industry Super try to find a way to blame Advisers. Quick Look over there it’s the Advisers fault again.
Corrupt useless ASIC & Industry Super always try to shift blame to Advisers.
I’m sure there’ll be a couple of super funds who will mandate that it’s a requirement for us to check a client’s pulse each day before they’ll accept our adviser fee requests
No, they wouldn’t trust us to do that without a process.
Here’s what it would look like.
Obtain client consent which states in writing that they agree that they have a pulse. This requires signature and ID.
As an adviser, write an attestation stating that you’ve met with the client and confirm that the client has a pulse.
Send through a video of the client undertaking a cardiogram demonstrating their pulse, whilst you hold up today’s newspaper next to them as proof of pulse to confirm the date.
Ensure that in your ‘Record of Advice’ to address why it is in your client’s best interest to continue to maintain a pulse.
Send all that off for processing to the Trustee.
Obtain a first response asking for evidence of cardiogram machine calibration and certification.
Resubmit with these documents attached.
Obtain a second response requesting validation of newspaper date to be declared under the Oaths Act to a Justice of the Peace.
Resubmit with these documents attached.
Obtain a third response requesting wet signatures regarding pulse declaration to be sent ‘wet signature’ via mail.
Resubmit with documents mailed directly to Trustee.
Obtain a fourth response that at the day of processing by the Trustee, the client’s ID has expired. Request new ID to be sent via mail.
Resubmit ID via mail directly to Trustee.
Obtain a fifth response stating that client signatures on original documentation differs to signature found on new ID.
……..
Anyone relate?
Not to mention the client gets the advice, goes away happy and the Super Fund can’t accept the form because the new account is not established as yet.
This new report on super funds, which includes both retail and industry funds, reminds me of the complete failure of the Hayne Royal Commission to look at the industry funds in any detail. CBUS were excused from appearing. The session with Ian Silk, the CEO of Australian Super, was nothing more than a friendly chat, with Commissioner Hayne engaging in friendly banter. Contrast that with the approach that the Royal Commission crew took with respect to financial advice. It is unbelievable to think that some of what has been reported recently and the action that ASIC is taking against CBUS and Australian Super was not happening at the time of the Royal Commission. They just didn’t look, or care to investigate. Why?
What this report demonstrates is the huge importance of having a financial adviser at claim time, who can help to ensure that claims are paid in a timely manner. Going through that process alone with some of these super funds is simply unfair. This is a point that we must emphasise.
From little things, big things grow.
Which includes piles of unprocessed death claims.
What did AMP cop for this? Anything less is, well,…. you know…. corrupt.
I wonder if ASIC will find a way to lose the case, either through incompetence or you know………