The Government has announced its intention to introduce mandatory standards for large superannuation funds to, amongst other things, deliver timely and compassionate handling of death benefits. Do we have a problem with paying out super when a member dies?

The value of superannuation in Australia is now around $4.1 trillion. When you die, your super does not automatically form part of your estate but instead, is paid to your eligible beneficiaries by the fund trustee according to the fund rules, superannuation law, and any death benefit nomination you made.

Complaints to the Australian Financial Complaints Authority (AFCA) about the handling of death benefits surged sevenfold between 2021 and 2023. The critical issue was delays in payments. While most super death benefits are paid within 3 months, for others it can take well over a year.

How to make sure your super goes to the right place

Death benefits are a complex area. The superannuation fund trustee has discretion over who gets your super benefits unless you have made a valid death nomination. There are four types of death nominations: binding, non-lapsing binding, non-binding, and reversionary beneficiary.

Who is eligible to receive your super?

Your super can be paid to a dependant, your legal representative, or someone who has an interdependency relationship with you. A dependant for superannuation purposes is "the spouse of the person, any child of the person and any person with whom the person has an interdependency relationship".

Where it can go wrong

For a death nomination to be valid it must be in writing, signed and dated by you, and witnessed. The wording of your nomination also needs to be clear and legally binding. The bottom line is, young or old, check your nominations with your superannuation fund and make sure you have the right type of nomination in place.

Download full Client Newsletter February 2025