The GFC hangover continues to affect super members.

Extreme market volatility resulted in a surge of complaints to the Superannuation Complaints Tribunal (SCT) last financial year, with many people caught out by the speed of market falls during the global financial crisis.

When the sharemarket plunged in late 2008, many people reacted by switching some or all of their super balance into cash or to a lower-risk investment option. But by the time the transaction was processed the value of the fund member's balance was often significantly lower than it had been when they requested the switch.

"The delays were not necessarily lengthy but the market was bouncing around so much that members could be extremely unlucky, depending on the day their transaction occurred," SCT chairwoman Jocelyn Furlan says.

Furlan says the high number of complaints about the administration of accounts in the 2008-09 financial year were a symptom of the global financial crisis and falling markets.

At times when markets are rising, delays in switching investment options or transferring to another fund are unlikely to result in losses or complaints.

"Because there were so many of these cases, we developed a procedure where we asked complainants what they would have done differently if they had known the transaction would take two weeks not one [for example] and sometimes people said they would have gone ahead anyway," she says.

While most cases were dismissed, Furlan says funds could do a better job of managing members' expectations through better communication of administrative processes.

The Tribunal received 1519 written complaints within its jurisdiction last year, up from 1441 the previous year and well up on levels of about 1000 before the financial crisis hit.

While two-thirds of complaints last year related to fund administration, Furlan says this has eased back to 50 per cent now markets are recovering. Complaints about death benefits have climbed back from 25 per cent to about one-third of all complaints.

Super death benefits are normally paid out to a spouse, de facto partner, dependent children or someone who lived in an interdependent relationship with the deceased.

"The issue we are grappling with most is interdependency," Furlan says (see case study). In the past, most claims relating to interdependency came from same-sex couples. But since legislation was introduced in 2008 giving them the same rights as de facto couples where super is concerned, Furlan says the main source of complaints is from adult children and siblings who are not dependents and don't meet the criteria for interdependency.

Furlan says siblings and others sometimes get their hopes up when they are named as the fund member's preferred beneficiary but the trustee overlooks them when the member dies.

Unlike a binding nomination where the super fund will only accept eligible nominees, no checks are made to establish if your preferred nominee is eligible to receive your death benefits.

Corporate super funds had the most complaints per member last year (and indeed every year). There were just fewer than 150 complaints per million members for corporate funds, more than twice the rate for public sector funds and three times the number for industry and retail funds.

However, Furlan says this is attributable to the higher average account balances for corporate funds. She says corporate fund members are more engaged with their super and more likely to complain because they have more at stake.

Some testing cases

Jake and Rececca*, both 18, were living together as girlfriend and boyfriend when Jake died. Although he had less than $1500 in his super account his super death benefit was worth more than $100,000.

Rebecca made a claim on the basis that she met the four requirements of interdependency. She argued that she and Jake lived together, had a close and dependent relationship, were financially interdependent and she provided personal support and domestic care. But Jake's parents are fighting Rebecca's claim, arguing that the couple had no money so they could not be financially interdependent. The case is now before the Superannuation Complaints Tribunal. "It's a difficult case. On the surface [the couple] satisfies the four criteria of interdependency but whether the legislation covers their arrangement has not been tested by the courts," says SCT chairwoman Jocelyn Furlan (pictured).

In another case, the 38-year-old adult son of the deceased super fund member objected to his father's death benefits being paid to his spouse. The son argued that his father was under a moral obligation to provide for him due to abuse he had suffered as a child.

However, the father had nominated his spouse as his preferred beneficiary and provided for her alone in his will. The tribunal argued that it was not its role to compensate for past injustices. It stated that the role of super, on the death of a member, was to provide a benefit for those who should have received financial support had the deceased not died.

*Not their real names