Speaking at the Australian Institute of Company Directors Australian Governance Summit on Wednesday, Australian Securities and Investments Commission (ASIC) chair Joe Longo made it clear that the corporate regulator is not going to ease its focus on the superannuation sector.
According to the chair, super fund failings in servicing members has been one of ASIC’s “key areas of focus”, with reports relating to the industry spiking over the last two years.
Last year, the Australian Financial Complaints Authority (AFCA) reported that 2023–24 saw 7,325 complaints related to super, compared with 5,286 just two years earlier.
“We’ve also received reports from consumer advocates and financial counsellors about super funds failing to serve their First Nations members,” Longo said.
“But when we showed some superannuation trustees their own claims handling numbers, they were surprised. The same thing happened when we read to them from their own complaint files.”
The super industry’s “governance challenges”, as the ASIC chair termed them, are related to the basic duties and expectations of directors.
“We’re not talking about anything new here – we are talking about well-established principles of governance and responsibility,” Longo said.
“Which is why, when I say that some super trustees are failing Australians in a critical service, it should be a warning to all directors not to let their fundamental duties slip.
“We will have more to say in a new report on superannuation member services in coming weeks, but the industry is the current poster child for what can and does go wrong when governance fails.”
Earlier on Wednesday, ASIC launched a lawsuit against AustralianSuper over delayed processing of nearly 7,000 death benefit claims, coming just weeks after the country’s largest super fund was ordered to pay $27 million for failing to merge duplicate member accounts.
The corporate regulator alleged between 1 July 2019 and 18 October 2024, AustralianSuper failed to process death benefit claims efficiently, honestly and fairly when it took between four months and four years from the date the claim form was returned to assess at least 6,897 deaths.
Addressing the action, Longo said it was about “protecting vulnerable Australians and their families”.
“It is also a demonstration of what can happen when there is not adequate oversight of systems in an organisation,” he said.
The chair also took exception to suggestions of ASIC having a “double standard” when it comes to the penalties it seeks against industry and retail super funds.
During Senate estimates last month, Liberal senator Andrew Bragg challenged the regulator on why it didn’t pursue the maximum penalty, given the large number of impacted member accounts, asking deputy chair Sarah Court if it was due to the fund’s lack of shareholders, as stated in court documents.
“If it was a fund that had shareholders putting capital into the fund, it seems to me, by reading your submission to the court, that you would have imposed the maximum fine of $140 million,” Bragg said.
Responding to the accusation on Wednesday, Longo said ASIC’s approach to penalties for misconduct is “same regardless of whether the fund is an industry or retail fund”.
“The legal principles are well-established. The primary purpose of civil pecuniary penalties is to deter future misconduct. If a super fund profits by breaking the law, ASIC will seek penalties that are sufficiently high to deter it and others from engaging in similar conduct, regardless of the structure of the super fund,” he said.
“That’s why Aware Super was fined $20 million for charging fees for no service, Westpac/BT was fined $20 million for incorrectly charging insurance commissions to members, Colonial First State was fined $20 million for misleading members, and AustralianSuper was fined $27 million – the second-highest penalty to a super fund in the last five years – for failing to merge multiple superannuation accounts.”
All of the issues that landed super funds large fines, Longo added, come down to “not knowing your business”.
“At the heart of this issue is leadership that doesn’t have a grip on the fund’s data, systems and processes – and the customers who suffer for it,” he said.
“This kind of disconnect is unacceptable in any area of corporate Australia. But in the superannuation sector it is particularly serious, because super literally affects everyone.
“And as custodians of nearly $3 trillion in hard-earned savings, APRA-regulated superannuation funds and their trustees have a clear responsibility to put members – better thought of as their customers – front and centre.”
ASFA returns serve
“Australia’s phenomenally successful super system is the envy of the world, and with good reason,” Association of Superannuation Funds of Australia (ASFA) CEO Mary Delahunty said.
Reflecting on super returns last year – which ranged between 10 and 12 per cent – Delahunty said: “These kinds of returns would simply not be possible if the boards overseeing the governance of super funds didn’t know their business extremely well.”
“The sector has a number of governance models, and each one has been designed to serve the member base within the fund,” the CEO said.
Acknowledging the need to make improvements in service, especially in complex matters like death benefit claims, Delahunty said, on behalf of the industry, ASFA welcomes any constructive approaches to improving the sector.
“Publicly deriding trustees who oversee institutions that provide Australians with excellent returns on one of their most important investments is a puzzling approach,” she said.
“Calling one of our country’s biggest success stories ‘the poster child for what can and does go wrong when governance fails’ is not constructive – it is confusing overreach that risks undermining faith in a vitally important sector that delivers for the vast majority of its members.”
