Superannuation 'mistake' slugs Aussies of thousands of dollars: 'Drain those funds'
Thousands of Rest Super members have unknowingly been paying insurance premiums for months due to a system error. It's the latest bungle to hit the $4.1 trillion superannuation sector, which is currently under heavy scrutiny from regulators.
Rest Super has written to around 2,500 members who have been wrongly paying insurance premiums since June last year. These were members who had either opted out of having insurance cover or previously had their insurance cancelled.
A Rest Super spokesperson told Yahoo Finance the error impacted a small number of uninsured members and said the error was 'addressed quickly' once identified.
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'Rest wrote to the impacted members to inform them of this mistake, and advised them how to cancel the insurance and have any premiums refunded,' the spokesperson said.
'Rest's approach is to honour any insurance coverage provided in error for a number of reasons, including in case any claims arise.'
Under the law, super funds will cancel insurance on inactive super accounts that haven't received contributions for at least 16 months.
Rest Super has its own rules around cancellation and may cancel it for accounts that have been inactive for 13 continuous months.Rest Super said it had alerted less than 2,500 of the impacted customers about the error.
'We made a mistake with your instance, but it's fixed now,' Rest told customers in a letter sent last month.
'Under the Rest Super insurance policy, whenever a member loses their insurance cover, we offer members 28 days from the date of cancellation to contribute to have the insurance cover reinstated.'
Due to a 'system error', the super fund said it received a contribution to certain member's accounts outside the 28-day period and restarted their insurance in error.
'This has resulted in you paying for insurance that shouldn't have been added to your account,' the letter said.
Impacted members are then advised they will keep paying the added fees and retain their insurance cover unless they opt out.
'If you no longer want the insurance cover we've reinstated, we can cancel it and refund the premiums. You need to let us know within 35 days of the date of this letter if you want us to do this,' the fund wrote.
The letter has been shared online, with one unhappy member claiming they had purposefully opted out of insurance only to be slugged with the added premiums.
The member argued it wasn't right to put the onus back on members to 'opt out' of insurance cover.
'They are not going to refund the charges and will keep charging for a policy you don't know you have (and therefore won't claim against) unless you contact them within 35 days,' they wrote.
Another Aussie called the decision to offer refunds as an opt in, rather than an opt out, 'a bit shady'.
'It should be refunded. Even if it is an old dormant account, it doesn't give an insurance company the right to drain those funds by 'providing' a service that no one knows about or even asked for,' one said.
Others argued it was beneficial that members could retain insurance cover that they might not otherwise be eligible for.
The superannuation industry is currently facing scrutiny from regulators.
Cbus is currently being sued by ASIC over allegations it failed to process more than 10,000 claims for death and disability payments in a timely manner.
The corporate watchdog is also reportedly investigating AustralianSuper for taking too long to pay out death benefits.
AustralianSuper, which is the country's largest super fund, announced in December that it would repay $4.2 million to deceased customer's loved ones as compensation for not resolving claims within the fund's four-month target.
The government has announced it will legislate new mandatory service standards for super funds. The standards will initially focus on improving slow payment of death benefits and other insurance claims, along with improving communication with members.
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