Australians give super funds a social licence to operate. Does HESTA's outage threaten that?

Australia Broadcast Center

3 days ago

Consider this — you try to log into your bank account to move some money around to pay a bill.
When you go to log in, you can't. You really need that cash.
There's a message at the top of the website — your bank is upgrading its system. You won't be able to log in to your account for seven weeks.
You can't withdraw any of your money, other than in exceptional circumstances.
Of course, this isn't a real story of a major Australian bank. That would be ridiculous, right?
Surely no-one would accept their bank going offline for nearly two months, even if it was with the promise of a better experience for customers on the other side.
And presumably the regulators would have something to say.
But it's not an entirely hypothetical scenario — one of Australia's major superannuation funds has just restored services, after being offline since mid-April.
More than 1 million HESTA members have endured a seven-week long "limited services period" that left them locked out of their accounts until the start of June.
The HESTA website bore messages alerting customers, noting that members should contact the fund if urgent payments were required.
The reason for the outage was for the fund to switch administration providers, which it said would bring "the opportunity to develop more personalised experiences for members, making it easier for them to manage their super".
Consumer advocacy group Super Consumers Australia slammed the length and extent of the outage, arguing it reflected "a real underinvestment in services" and "a lack of strategic vision".
With the decision made and the switch underway, all HESTA could do was try to minimise the pain.
On Monday afternoon, after normal service was scheduled to have resumed, the fund's website indicated it was receiving a high volume of calls and apologised for inconveniencing customers.
When bank customers are mistreated or disrupted, whether it be by poor conduct or technical failure, the banking sector is reminded — by everyone from the media and politicians to consumer groups and outraged customers on social media — of its social licence to operate.
That is, the unspoken understanding between the financial institutions and the public, that banks shouldn't just be money-making machines, that there is also an obligation to do right by their stakeholders. Most importantly, their customers.
It's a licence that extends to super funds — and it's implicit in the structure of industry funds that are owned and operated by members, for members.
That's on top of the legal requirement for all super fund trustees to act in members' best financial interests.
Australian workers don't opt in to super so their interaction with the sector isn't by choice.
Self-managed super funds (SMSF) can be complex to set up and operate, and require tailored financial and legal advice, so it's unsurprising that they skew older and towards higher-income earners (85 per cent of SMSF members are over 45).
That leaves most Australians (among them, the young, and lower and average income earners) in retail or industry super funds — choosing from a limited range of providers to handle a substantial chunk of their income, in many cases for decades.
Australians don't frequently change super funds — a 2018 Productivity Commission report found that, historically, fewer than 10 per cent of members switch funds each year.
Like bank accounts, the barriers to switching funds can seem like an administrative nightmare, and the resulting loyalty rewards funds, rather than members.
ABC News first reported on the HESTA outage after receiving messages from several concerned members, unable to access their funds.
Some had been unaware of the outage until it had already begun. Others had received notification several months prior but then had issues withdrawing cash in advance, despite contacting the fund as HESTA had advised.
Our reporter Adelaide Miller has continued to received dozens of messages from members over the last seven weeks, some facing financial stress, including several who were at risk of a property purchase falling over.
Each time questions were put to HESTA, customers ended up having their situation resolved — HESTA processed their withdrawals and personal disaster was avoided.
The super fund even asked Miller if she could pass on the details of any member that had written into the ABC with concerns — apart from obvious privacy issues, the public broadcaster isn't resourced to, and shouldn't, act as a quasi-customer service team.
If HESTA members were finding it easier to get in touch with the ABC than with HESTA, that surely raises a bright red flag.
To hark back to the bank example, if your bill was looming and you couldn't withdraw your cash online, the likely first port of call would be to phone your bank.
Contacting a news organisation is hardly an efficient or logical way to contact your financial institution — and it's extremely unlikely to have been your first instinct.
By the time people contact journalists in these types of situations, they've typically exhausted their options, or believe any other avenue will prove futile.
Admittedly, some of the HESTA members had not contacted the super fund first. In response, HESTA drew our attention to the communications on their website, referring to urgent transactions still being available.
Some of the members who contacted the ABC didn't know whether their requests would fall into the urgent category, so had instead resorted to contingency plans, like borrowing money from friends or family. Others had tried to contact the fund with no success.
Whether the members made the right or wrong calls, one thing is clear — and it isn't HESTA's communications.
It's that on top of the inevitable disruption caused by the outage itself, the fund's messaging and customer service failed to both 1) inform all members, and 2) accurately convey what transactions were considered urgent.
It's easy for HESTA to, in hindsight, process transactions that had been brought to the media's attention and state that the member would've been assisted all along.
Of course, the outcome for the members who did have their withdrawals processed is the best-case scenario — but we'll never know how many stressful situations or financial difficulties were created and not redressed.
HESTA also has more than 1 million members. People who are still working and accumulating their super are unlikely to be regularly logging in and checking their accounts.
For most people, the outage would've passed without event, or even unnoticed.
But the times when people need their money often come with high stakes — a death payout awaited after the loss of a loved one, a large withdrawal needed to complete a major transaction.
At the centre of the multiple and varied problems facing super members in recent times lies a central issue — customer service.
On first glance, a "credential stuffing" cyber attack, systemic issues with death payouts and insurance claims handling, and a multi-week planned outage don't have a lot in common.
But all result in a sub-par experience for members — and all reflect the investment decisions made by the funds.
Whether it be multi-factor authentication to better protect customer accounts, beefed-up claims handling training and resourcing, or earlier investment in administration platforms, the solutions all involve putting a focus on how members experience their interactions with their super funds.
The corporate regulator has death benefit claims handling particularly in its sights, having taken court action against AustralianSuper, and slammed the industry for poor customer service at an extremely vulnerable times of peoples lives.
Australia's superannuation pool is worth nearly $4.2 trillion — the funds are undoubtedly extremely adept at taking and investing members' money.
But when it comes helping members to access it, they are falling short.
Earlier this year, the Grattan Institute highlighted that many retirees continue to grow their super balances decades after they retire, for fear of outliving their savings.
The think tank said Australians are mostly steered towards account-based pensions, and half of those using those pensions draw down their super at the legislated minimum rates.
Its modelling found those drawing down at the minimum rate when they retire will leave the equivalent of 65 per cent of their original super balance unspent by the age of 92.
It's a sign that the default settings leave a lot of money unused and not enjoyed by retirees.
After decades of accumulating income for their retirement, it seems many face barriers to withdrawing their funds — including knowing how much is needed to survive into old age, and overcoming the mental hurdle to confidently spend their super savings.
The law puts the onus on super funds to act in the best financial interests of members. Those members should be able to access their funds easily when the time comes.