Some super funds charged fees to deceased members

Mike Taylor

Managing Editor and Publisher

1 April 2025

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).