Cbus Super CEO Kristian Fok said it will be getting rid of ‘outdated’ practices to make sure death benefits are paid out in a timely manner. (Source: Getty)
A large Australian superannuation fund has announced a huge shakeup in the way it handles death benefits. Workers are meant to nominate beneficiaries to their super fund so that it knows where to send their retirement money in the event of their death.
But Cbus Super said that many of its members don’t do this, which can elongate the payout process, as family members and loved ones might make a claim on the money. Cbus is now overhauling its system to make this scenario much faster by “stripping away” much of the complexity.
“We’re removing outdated barriers like paper-only forms and witness requirements to make them easier and faster to complete,” Cbus Super CEO Kristian Fok said.
At the moment, super funds will allow you to list binding and non-binding beneficiaries for your money.
Only someone who is a dependent can be a binding nomination, including your spouse, children, or a person in an interdependency relationship with you.
A non-binding nomination is anyone else, including friends, siblings, parents and others, but funds don’t necessarily have to abide by those wishes and might instead follow instructions laid out in your will.
These can be listed in no time at all and online, whereas a binding nomination usually requires a lot of paperwork that has to be completed with other people present.
Binding nominations can also lapse after three years, meaning you have to constantly update your super fund to the person you want your money to go to.
Some funds allow you to do this online, but others require the paperwork to be done all over again and mailed in.
Do you have a story? Email stew.perrie@yahooinc.com
Cbus Super, which has $100 billion in funds under management and more than 924,000 members, is introducing non-lapsing binding beneficiary nominations that can be completed digitally.
It will also get rid of non-binding beneficiary nominations.
If a member hasn’t nominated a beneficiary, the superannuation funds will be paid to the person’s surviving spouse.
If they don’t have a spouse, it will then flow to the person’s children. In lieu of children, the money will be directed to the member’s estate.
“This reform will eliminate the need to undertake lengthy and complicated ‘claim staking’ in most cases – a process the fund uses to determine eligible beneficiaries – cutting out an estimated four to six weeks from the death claim process,” Cbus said.
Story Continues
It won’t happen overnight, though.
This will be brought in over 18 months in two stages, with the first transformation commencing in December.
According to Super Consumers Australia, 6.5 million Aussies had not made binding nominations for their death benefits, meaning they would technically have no say in where their money goes.
Simplifying the process will allow money to go to loved ones much quicker and is aimed at reducing family squabbles.
When someone dies, non-binding nominees, as well as others, can make claims on superannuation money.
Hannah Elliott, associate advisor from Stellar Wealth, told Yahoo Finance that some super funds don’t even let you know if the nomination you’ve made is binding or non-binding.
“In many cases, if an invalid nomination is made, the super fund will simply accept it as a non-binding nomination without providing any warning or follow-up,” she said.
Associate financial advisor Hannah Elliott said you need to make sure your superannuation beneficiary is valid. (Source: Instagram/Getty)
“This is because they assume the member has read and understood the eligibility criteria when completing the form.”
The change also comes after Cbus was sued last year by the corporate regulator, ASIC, for not processing 10,000 death and disability claims in a timely manner.
The alleged behaviour went from September 2022 to November 2024, with more than 6,000 of those claims facing delays of over a year.
Cbus estimated the financial loss to be $20 million to members and claimants.
“Delays in claims processing like those alleged by ASIC cause real harm to families who may be relying on the payments to meet critical expenses,” ASIC Deputy Chair Sarah Court said.
“This adds to difficult personal circumstances, whether grieving for a loved one or dealing with severe injury or illness. The additional anxiety and pain these delays caused compounded the issues these members and their families faced.”
Cbus established a compensation program for affected members and issued an apology to members.
“We apologise to our affected members and their families without reservation and promise to do better,” it said.
Get the latest Yahoo Finance news – follow us on Facebook, LinkedIn and Instagram.