Hope Arrives on Super Death Nominations

There is a serious but largely invisible problem in our superannuation system—fortunately a simple answer is beginning to get rolled out.

Most superannuation members may know that they need to fill out a nomination suggesting who should get their superannuation when they die.

However, many people are not aware that this nomination can lapse and if not renewed, then the super distribution after death is left up to the super fund trustees to decide.

Recent research by Super Consumers Australia (SCA) found at least 15.5 million Australians may not have a binding death benefit nomination, putting them at risk of it having lapsed.

The SCA research also found that two-thirds of Australians have not been contacted by their super fund over the past year encouraging them to make a binding death benefit nomination.

Industry Funds Making Changes

Slowly but surely this hidden issue is finding a solution as large funds change the way they arrange death benefit nominations.

Both HESTA and Cbus recently announced changes in their nomination process that allow much easier updates to be made online.

While the fine details differ, the idea is that non-lapsing binding death benefit nominations can be made instead of having to renew nominations every three years.

Usually, the nomination can name dependents or a legal personal representative (usually the executor of your estate) or both and that nomination is binding on the fund.

Thorny Issue for Super Funds

The whole issue of death nominations has become a really thorny one for super funds with many putting surviving dependents through the wringer, demanding reams of forms and also causing massive delays at a time when bereaved relatives need support rather than the runaround.

While the issue of long delays seems to have been improved by many (but not all) funds, the process of determining who is the nominated person for death benefits can still be lengthy if the trustees are depending on lapsed nominations or find circumstances have changed.

Many people still don’t realise that super assets do not simply roll into a dead person’s estate, and are payable completely separately rather than through the will.

Also, if the named beneficiary has died, it then reverts to the super fund trustees to make a determination about who is paid the remaining super.

The only way super assets can be distributed through a will is if the executor of the will is named as a legal personal representative.

Now Available Online

Both HESTA and Cbus will now allow members to update non-lapsing binding nominations online, which is a big advance that should prevent some of the issues arising from super nominations.

HESTA will also continue to offer lapsing binding death benefit nominations, which must be renewed every three years, along with non-binding beneficiary nominations.

However, Cbus will no longer offer non-binding death benefit nominations and removed non-binding nominations listed on member accounts from August 7.

That response by Cbus is perhaps a product of some regulatory action the fund would not care to repeat.

Last October, Cbus agreed to pay $23.5 million to settle a matter brought against it by ASIC in relation to delayed death benefit payments to members.

Some members were hit by delays to death and Total and Permanent Disability claims processing, having to wait more than 90 days.

Onus Shifts to Members

Like all fixes to a problem, the end of lapsing death nominations for some funds and the encouragement of non-lapsing nominations by others brings about another possible issue.

By not pushing for renewing the nomination every three years, the onus could now fall back on super fund members to remember to change their nominations in the event of a change in their circumstances such as the death of a spouse.

It may only take a simple action online to do it but not having an up-to-date nomination at the time of death can lead to a longer and more difficult than necessary process for your survivors and the super fund.