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Internal documents show that AustralianSuper was aware of the growing backlog of claims by late 2020, and that the issue was recognized as systemic in 2021.

The Australian Securities and Investments Commission (ASIC) has launched legal action against AustralianSuper, the country's largest superannuation fund, over its failure to process death benefit claims fairly and efficiently and in a timely manner.

The corporate watchdog confirmed on Wednesday that it is suing AustralianSuper in the Federal Court for delays in processing nearly 7,000 claims. The regulator stated that from July 1, 2019, to Oct. 18, 2024, the fund took between four months and four years to assess these claims.

In some cases, AustralianSuper took years to process claims. For example, it took one claim 1,140 days, while others took 438, 412, and 366 days to resolve. ASIC also alleges that the fund failed to pay benefits to the families of deceased members promptly, which is required by law. In total, 752 members' families did not receive benefits in a timely manner.

In 254 cases, AustralianSuper took between 15 and 213 days just to provide the claim form, ASIC pointed out.

ASIC Chairman Joe Longo referred to the savings sector as the "poster child" for governance failures, Australian Financial Review reported.

ASIC has also accused AustralianSuper's board and its former CEO Ian Silk of being aware that the AU$365 billion fund was causing delays for years but not doing enough to fix the problem.

ASIC Deputy Chairman Sarah Court stated that the delays violated laws that require funds to pay out benefits as soon as possible after a member's death.

It's the second case ASIC has taken against a super fund in the past year. In November, ASIC sued the AU$94 billion Cbus super fund for similar issues, which had led to at least AU$20 million in delays for deceased members' families.

AustralianSuper said it is carefully reviewing ASIC's claims, but blamed COVID-19 pandemic for the backlog, Sky News reported.

"Paying out members' retirement savings after they die is the final service we provide them," the AustralianSuper said in a statement on Wednesday. "During Covid, a sharp increase in member deaths and a significant impact of the pandemic on staffing numbers saw a backlog relating to the processing of death claims emerge. We recognised this and developed a strategy with our service provider to clear the backlog of claims."

The fund also acknowledged that it and its service provider, Link, did not meet their agreed service standards. Internal documents show that AustralianSuper was aware of the growing backlog of claims by late 2020, and that the issue was recognized as systemic in 2021.