An elderly man who had lost his wife to cancer and urgently needed access to funds owed to him to cover an outstanding mortgage had his payment unnecessarily delayed 28 days, causing "significant further distress".
A First Nations woman distraught following her husband's death had to wait 500 days to get approval to access $100,000 in funds he had accrued and was given little support to navigate the process, despite her cultural barriers.
Financial regulator the Australian Securities and Investments Commission found superannuation funds were responsible for delays caused by processing issues within their control in more than three-quarters of the death benefit claims it reviewed.
Industry peak body the Association of Superannuation Funds of Australia apologised on Monday for letting down members and their families after the personal toll of the industry's systematic claims handling failures were exposed.
Trustees are facing a reckoning as the sector matures from wealth accumulation to decumulation, with a growing strain on resources to pay out millions of members.
After initiating legal proceedings against heavy hitters Cbus and AustralianSuper, the financial regulator is putting fund executives on notice to shape up.
"Many of the complaints we read were distressing," Commissioner Simone Constant said.
"We saw deep grief, vulnerability, frustration and genuine suffering."
Poor customer service was rife among the 10 trustees - representing 38 per cent of all benefits managed by super funds - the commission reviewed.
Funds failed to return claimants' phone calls, dismissed queries from grieving family members, or asked them for unreasonable information.
Death benefits refer to the remaining superannuation balance in a member's account after they die, which a beneficiary - usually a family member - is entitled to be paid as soon as practicable.
The super funds association acknowledged the report detailed "sobering examples of where service simply wasn't good enough".
"While the majority of our members and their families have a seamless experience with death benefits claims, we know we need to do better to make sure this is the experience of as many people as possible," chief executive Mary Delahunty said.
"Trustees need to take utmost care in paying death benefits, but excessive waiting, lack of communication and inconsistent processes are not acceptable."
The report, released on Monday, made 34 recommendations for funds to adopt.
They focused on improving customer service and speeding up response times, better monitoring and reporting, streamlined claims processes, better staff training and removing barriers for Indigenous claimants.
The super sector had made significant changes in the 12 months since the period examined and was implementing "many" of the recommendations, Ms Delahunty said.
While timelines to respond to claims varied greatly between funds, none of them closed more than half of claims within 90 days, the report found.
Colonial First State trustee Avanteos was the most timely performer, while Rest closed just eight per cent of claims within 90 days and had more than half of claims outstanding after six months.
None of the trustees monitored or reported on their end-to-end claim handling times or performance, revealing a gap in oversight.
The commission reviewed a mix of retail, public sector and industry super funds including big players such as Australian Retirement Trust and UniSuper.
The review did not include Cbus and AustralianSuper as the commission prioritised its legal action against them.
The federal government has pledged mandatory standards to force super funds to pay out death benefits faster and provide better communication to claimants if it is re-elected.
11°C