Super complaints firmly under the microscope

From government consultations to ASIC reviews, Super Review has put together a timeline of how super funds’ handling of member complaints and its related issues has grown in prominence in the last 12 months.

This week, the Australian Financial Complaints Authority (AFCA) has reported a 20 per cent rise in complaints about delays across financial products last year as politicians have called on super funds to improve their practice.

For the first time, AFCA said it has recorded 100,000 complaints in a calendar year, affirming how the volume of complaints escalated to the complaints authority has been “increasing at an unsustainable rate,” according to AFCA chief executive and chief ombudsman David Locke.

Super Review has rounded up the major events in what is turning out to be a hot topic for the government and organisations like.  

VIEW ALL

View all

March
In its member forum, AFCA noted that it had received over 5,000 complaints regarding superannuation in 2022, up 11 per cent on the previous year, with 3,307 of these related to members’ super accounts.  

The other common product-related complaints were around total and permanent disability (933), income protection (820), death benefits (475), and pensions (74). 

The top issue-related complaints across super received by AFCA were delays in claim handling (990), service quality (889), and account administration error (573).

May
The government released a consultation on amending the Corporations Act to allow AFCA to hear complaints regarding super.  This would apply if the complaint met the definition of super complaints in the Corporations Act and reinstated the original policy intent. 

This followed a Federal Court decision against MetLife in October 2022 that a complaint relating to super could only be brought to AFCA if it met the definition of superannuation complaint, which the government said was “contrary to the original policy intent”.

September
This month, Super Review covered how there are issues with super funds’ internal dispute resolution (IDR) processes that are prompting members to directly contact AFCA rather than their own fund.

While members are encouraged to first contact their super fund in order to resolve a complaint via the internal dispute resolution (IDR) process, AFCA said the number of members contacting them directly is on the rise.  

Of all complaints referred back by AFCA to a super fund last financial year, 55 per cent were from consumers who contacted AFCA first rather than their fund’s IDR team. From May 2023, this percentage has increased further to 66 per cent, which AFCA has flagged as a concern.

AFCA told Super Review a lack of engagement with IDR might indicate a “breakdown of trust” with the fund or inadequate identification of a member’s expression of dissatisfaction.

October
AFCA’s annual report for the 2022–23 financial year revealed there was a 135 per cent rise in complaints to AFCA about delays in complaints handling by super funds. Overall, the organisation said there were 6,957 complaints related to super compared to 5,286 in the previous year.

However, the number of complaints that were resolved rose from 33 per cent to 43 per cent. Some 6,142 complaints were closed during the year and the average time taken was 102 days.

November
Appearing before the Senate economics reference committee, ASIC deputy chair Sarah Court stated delays in super complaints of up to two years are a high priority for the corporate regulator.

Shortly after that, in a letter addressed to Minister for Financial Services Stephen Jones, Senator Andrew Bragg called for a clear timeline for action on addressing super complaints regarding delays in death benefit payouts. Dated 6 November 2023, he called on the minister and ASIC chair Joseph Longo to prioritise serious misconduct issues on the part of superannuation trustees. 

November also saw the first case of a super fund facing court proceedings over its IDR processes, with ASIC commencing legal action against TelstraSuper.  The corporate regulator alleges some 40 per cent of TelstraSuper’s responses to complainants during the relevant period failed to comply with its own dispute resolution procedures. 

It alleges that between 22 October 2021 and 13 January 2023, the $23 billion super fund received 337 superannuation complaints, but failed to comply with notification requirements when it failed to:

• Respond to 106 complainants within 45 days.
• Inform 85 complainants about why there was a delay in responding to their complaint.
• Inform 22 complainants about their right to take their complaint to AFCA.

It further alleges that TelstraSuper failed to operate efficiently, honestly, and fairly when it failed to comply with its procedures, sent delay notifications to complainants when it was not justified to do so, and did not have adequate resources to comply with its internal dispute resolution procedures.

Moreover, in an AFCA member forum, Anne Maree Howley, senior ombudsman at AFCA, revealed that super complaint delays remain a major concern for Jones.

“He noted that the superannuation industry had done an excellent job in producing accumulated wealth for retirement for its members. However, he was not so complimentary about the level of service, consumer support, and consumer redress for members the industry is providing,” she explained.

“In particular, he spoke again of his concerns in relation to the increase in AFCA superannuation complaints. Delays in claim handling create an issue for those who are at their most vulnerable.”

December
Speaking at the ASFA conference in Adelaide, ASIC’s senior executive leader of superannuation and insurance Jane Eccleston, warned funds could face penalties or enforcement action if they haven’t sufficiently stepped up their game regarding complaints.

“You will have already seen we have commenced enforcement action in relation to a trustee, so with anything there is a whole range of ASIC action available. Sometimes it’s contacting the trustee and getting them to fix the problem and other times we take more dramatic steps and it’s going off to court and giving them a penalty,” Eccleston said.

January 
AFCA revealed it has received over 100,000 complaints in the calendar year 2023 and delays in claims handling, which include insurance in super, are the second-biggest issue for complainants.