The Australian Securities and Investments Commission will examine how super trustees address complaints data after it found excessive delays in death benefit payments, causing "significant distress" for grieving family members.
Rising complaint numbers should have served as an early warning sign for trustees to address the issues themselves, preventing the need for the watchdog to intervene, ASIC chair Joe Longo told an American Chamber of Commerce event on Thursday.
"But sadly, our work across the sector has exposed its shortcomings and blind spots," he said.
Death benefits refer to the superannuation balance left in a member's account after they die, as well as payments from disability and income protection insurance, which a beneficiary - usually a family member - is entitled to be paid as soon as practicable.
Of 10 super funds reviewed by ASIC, none of them processed more than half their death benefits claims within three months, with the slowest processing just eight per cent in that time.
"Many trustees didn't even monitor how long their open death benefit claims had been going - was a claim 90 days old or 500 days old? If the trustees had done this - as we did - they would have found that claims went unresolved for months and sometimes years," Mr Longo said.
"If trustees had acted on this data - as we did - they may not be facing enforcement action."
As part of ASIC's multi-year project to wake superannuation boards out of their torpor, the regulator will begin gathering information from selected entities about their complaints handling processes in the second half of 2025.
Ignorance is no excuse for super funds failing their customers Mr Longo warned, reminding trustees that it is already an enforceable requirement to regularly analyse complaints data to identify systemic issues.
"So a failure of data, systems, and processes doesn't just let their members down - it means trustees are failing to comply with their obligations," he said.
"And, where appropriate, ASIC will pursue enforcement action in response to that failure."
Peak super body, the Association of Superannuation Funds of Australia, has apologised for the death benefits failings and said improvements were already underway.
"The superannuation sector knows we have let down some of our members and their families at a time when they needed us, and we are sorry," said ASFA CEO Mary Delahunty.
"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."
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