The recent release of the Australian Securities and Investments Commission’s (ASIC) Report 806: Taking Ownership of Death Benefits – How Trustees Can Deliver Outcomes Australians Deserve has shed light on significant inefficiencies in the superannuation death benefit claims process.
For many Australians, superannuation represents one of their largest assets. However, ASIC’s findings reveal that beneficiaries are often subjected to undue delays, confusion, and poor communication when seeking access to death benefits following the loss of a loved one.
These failures not only cause financial distress but also add to the emotional strain of an already difficult time. The report highlights systemic issues within the superannuation industry, with many beneficiaries facing challenges in accessing their entitlements in a timely and efficient manner.
ASIC Report 806: Key Findings
ASIC’s review of 10 superannuation trustees (including industry, public sector and retain funds), covering 38% of member benefits in APRA-regulated funds, identified several concerning weaknesses in the death benefit claims process:
- Excessive Delays and Poor Service: Some trustees processed as little as 8% of claims within 90 days, while others managed around 48% in the same timeframe. Shockingly, 78% of claims were delayed due to issues within the trustees’ control.
- Lack of Monitoring and Accountability: None of the trustees tracked or reported on their claims handling times, leading to inefficiencies that went unresolved.
- Unclear and Inconsistent Claims Procedures: Beneficiaries often encountered confusion due to inconsistent or ambiguous claims processes, making it more difficult for them to access the funds they are entitled to.
- Poor Communication: Many beneficiaries reported issues with customer service, including unreturned calls, lack of updates, and dismissive interactions with superannuation fund representatives.
- Failure to Support First Nations Claimants: The report revealed that trustees were not providing culturally appropriate support for First Nations beneficiaries, further exacerbating the difficulties in accessing death benefits.
ASIC’s 34 recommendations for improving death benefit claims handling are aimed at addressing these issues and ensuring that beneficiaries receive their entitlements without unnecessary delay. Some of these include:
- Enhancing customer service and reducing response times.
- Implementing robust monitoring and reporting mechanisms for claims processing.
- Streamlining procedures to expedite claims.
- Providing better guidance and training for staff.
- Removing barriers for First Nations members and claimants.
- Improving communication and support for members (regarding Binding Death Benefit Nominations (BDBNs)) and beneficiaries.
What Does This Mean for Your Estate Planning?
The findings of ASIC’s report highlight the importance of proactive estate planning—especially when it comes to ensuring that your superannuation death benefits are distributed according to your wishes. Without proper planning, your loved ones could face unnecessary delays, confusion, or disputes that could strain an already challenging time. To ensure that your superannuation is distributed as you intend, consider these key estate planning strategies:
Steps to Protect Your Beneficiaries from Delays and Disputes
- Make a Legally Binding Death Benefit Nomination
Many Australians assume that their superannuation will automatically go to their estate or directly to their intended beneficiaries. However, without a BDBN, the trustee has the discretion to decide who receives your superannuation death benefits.
- A binding nomination ensures that your superannuation will go directly to your chosen beneficiaries and cannot be overridden by the trustee.
- Most nominations lapse after three years unless renewed—so it is important to regularly review and update your nominations.
- Consider Who Qualifies as a Dependent for Tax Purposes
Superannuation death benefits are taxed differently depending on whether the recipient qualifies as a dependent or non-dependent under taxation law.
- Spouses and minor children typically receive tax-free superannuation death benefits.
- Adult children and non-dependents may be subject to significant tax liabilities, which can be as high as 32% of the benefit amount.
Proper estate planning can help reduce tax burdens for your beneficiaries by structuring the distribution of your superannuation death benefits in the most tax-efficient way.
- Align Your Superannuation Plan with Your Will and Estate Planning Strategy
A well-structured estate plan ensures that all your assets—including your superannuation—are distributed efficiently and in accordance with your wishes.
- Ensure your will, trust arrangements, and superannuation nominations work together to avoid any conflicts or ambiguities after your death.
- Consider whether a superannuation proceeds trust might be beneficial for your specific circumstances, as it can help ensure that your superannuation is distributed to the right beneficiaries in a way that aligns with your broader estate planning strategy.
- Document and Communicate Your Intentions
One of the key causes of inheritance disputes is when beneficiaries are caught off guard by unexpected outcomes.
- Communicate your estate planning intentions—including your superannuation nominations—with your family to set clear expectations and avoid confusion or conflict.
- Keep records of your superannuation nominations, estate planning decisions, and any other important documents in an accessible and central location.
- Seek Legal Advice from a Wills & Estates Specialist
Superannuation laws and estate planning strategies are complex and can change over time. Without proper guidance, even the most well-intentioned estate plans can lead to legal challenges or tax pitfalls that harm your beneficiaries.
Ensure Your Affairs Are in Order
Given the serious shortcomings highlighted by ASIC’s report, ensuring that your estate plan is clear, legally sound, and regularly updated is more critical than ever. Without proper planning, your superannuation death benefits could be caught in bureaucratic delays, causing unnecessary stress for your loved ones.
The complexities and potential delays highlighted in ASIC’s report make it more important than ever to ensure that your estate plan is clear, legally sound, and regularly updated. If you don’t have a valid Binding Death Benefit Nomination in place, your superannuation death benefits may not be distributed in the way you intend, leaving your beneficiaries vulnerable to delays and disputes.
We specialise in Wills & Estates and help clients navigate the intricacies of superannuation and estate planning to protect their assets and loved ones. Lisa Berte, an Accredited Specialist in Wills & Estates, together with our experienced team are available to provide tailored legal advice and ensure that your estate plan meets your unique needs.
