Superannuation service standards update

On 28 January 2025, the Australian Government announced its intention to develop new mandatory service standards for all large super funds. The announcement was in response to public concerns about inconsistent member service levels which had attracted regulator, political and media attention. While acknowledging most funds offer services that meet member and community expectations, the Government says legislated Standards will provide clearer, more detailed expectations than current principles-based regulations and will provide greater certainty as to the behaviours expected from funds. 

A focus on critical member service functions 

After several months of policy development, the Government has recently held its first round of consultation on its proposed approach to mandatory service standards. The proposed standards focus on the timely and compassionate handling of death benefit claims, fair and efficient insurance claim processing, and clear, respectful communications with members, including those in vulnerable circumstances. It also proposes to introduce new reporting obligations covering operations of trustees and their service providers.  

The suggested start date for initial standards covering these areas would be July 2028.  The scope of the standards may expand in the future to address other issues, including cybersecurity and broader member engagement.  

The standards are drafted to be more granular than the existing legal requirements, which have traditionally been ‘principles-based’ rather than prescriptive in nature. Focusing on insurance and death benefits claims handling, the standards propose maximum timeframes for each step in the claims process, with requirements for regular status updates if matters extend beyond initial periods. If implemented as proposed, funds will need to build systems capable of tracking and meeting these specific timeframes. 

Enforceability 

The proposed standards will carry significant regulatory teeth. Once legislated, they'll apply to all large APRA-regulated funds regardless of whether services are insourced or outsourced. Trustees will be accountable for any third-party provider breaches, with enforcement mechanisms including financial penalties scaled to breach severity, mandatory remediation for affected members, and requirements to communicate breaches to impacted individuals. It is proposed for all breaches to be reportable, ensuring regulatory visibility. APRA and ASIC will have powers to pursue enforcement action, with penalties potentially varying based on circumstances like natural disasters. Furthermore, the Government proposes to create personal accountability for trustees and executives. The expectation appears to be for funds to embed the proposed standards into their governance, risk management, and operational systems.  

Industry response and implementation challenges 

The superannuation industry has broadly welcomed the Government's focus on improving member outcomes, though implementation will require significant investment in systems and processes. Some funds may already meet or exceed the proposed standards, however, the shift from voluntary best practice to mandatory compliance will require all funds to demonstrate consistent performance across their entire membership base. 

The consultation process has revealed practical challenges that funds will need to navigate. These include coordinating with multiple service providers, managing legacy technology systems, and ensuring staff are adequately trained to handle sensitive member interactions. The requirement for public reporting of service metrics will also introduce a new dimension of transparency and competitive pressure. 

Looking ahead 

There is still a long way to go in developing and legislating these Standards. The Government has indicated it will consider industry feedback before finalising the standards, with further consultation expected in 2026. Nevertheless, as the standards progress toward implementation, funds should begin to assess their current capabilities against the proposed requirements.