An Australian superannuation fund will find itself out of pocket by almost $500,000 after a tribunal found it paid superannuation death benefits without doing proper checks on who should have received the money.
Brisbane estate litigation lawyer Charlie Young acted on behalf of a deceased’s son in a complaint against Colonial First State in the Superannuation Complaints Tribunal after it paid $460,000 in death benefits to the sister of the deceased man.
Trouble was, when the son found out what happened, he took action.
Mr Young, of Brisbane law firm Bennett & Philp Lawyers, said the win - on behalf of the son and the deceased’s estate - was a powerful reminder to superannuation funds for them to do thorough checks and be very careful before deciding who is entitled to receive death benefits.
Colonial First State is one of Australia’s largest superannuation funds, responsible for some $37 billion of superannuation money. The tribunal decision for Mr Young’s client may now force the fund to review its practices when managing a superannuation portfolio for a deceased person.
The matter was complicated. The deceased lived in Queensland. His sister lived in Zimbabwe while his son lived in South Africa.
To further complicate matters, the deceased had filled out a non-lapsing death benefit nomination to leave his death benefits to his sister as his ‘interdependent’. The super fund accepted that at the time.
But Mr Young said once the deceased passed away, Colonial did not act fair and reasonable in ensuring that the sister was in fact an ‘interdependent’ before paying benefits to her. Rather, it accepted the sister’s application on face value that she was an interdependent, when the evidence she put forward clearly suggested otherwise.
“So Colonial on that face value basis decided to pay her the $460,000 without doing proper checks and balances. Our client later discovered this and asked Colonial for detailed information and documentation as to how and why it came to its decision to pay the sister, but Colonial refused to co-operate.
“Faced with this brick wall, we filed a complaint to the Superannuation Complaints Tribunal for a review of Colonial’s decision, and argued that Colonial should not have followed the non-lapsing nomination as the sister was clearly not in an ‘interdependency relationship’.
“We argued that the fund should never have paid the sister and that the death benefits should have instead been paid to the deceased’s estate or to the son. We said the fund’s decision to pay the sister was in no way fair and reasonable based on the information available to the fund.
“The tribunal agreed, ordering Colonial to pay the same sum but with interest, to the deceased’s estate, which dealt a costly blow to Colonial,” Mr Young said.
“The fund should have done more to check where the benefits should be paid, not just taken one person’s word,” he said.
“It was very difficult to get any information out of the super fund as to why it decided to pay the sister. This necessitated the complaint to the SCT to contest the fund’s decision.
“The fund now has to pay $460,000 to the deceased’s estate plus interest (irrespective of whether it gets the $460,000 back from the sister or not),” Mr Young said.
There are lessons from this episode, he added.
“Superannuation funds should regard this as a wakeup call to ensure they do all the necessary checks and balances before paying out death benefits,” he said. “It is also important for people to remember that, if they have concerns a superannuation fund may not be paying death benefits to the proper recipients, to question and if necessary pursue the fund to ensure a just outcome.”