Super giant Mercer cops $10.3m fine after dead members charged premiums, among other failures

Mercer Super has been hit with a $10.3 million penalty after failures in its compliance systems left the corporate watchdog in the dark about serious member issues, including insurance premiums charged after members had died and later refunded. The Federal Court found Mercer’s systems for telling the Australian Securities and Investments Commission about reportable problems were inadequate for almost three years, from October 2021 to September 2024. Under the reportable situations regime, financial services licensees must promptly alert ASIC when they investigate potentially significant breaches of their legal duties. Mercer failed to report seven investigations at all and reported another late. “Given the long duration of the investigations in relation to the eight incidents, ASIC’s supervisory role was seriously compromised,” Federal Court Justice Catherine Button said. The investigations included failures that led to higher fees and less favourable insurance for some members, delays allocating $64 million in member funds, and failures to provide death and total and permanent disability cover to eligible members. In the late-reported matter, the court found Mercer failed to take reasonable steps to ensure its ASIC reports were accurate, and gave false or misleading information that understated the number of affected members. Justice Button also found Mercer was on notice its compliance systems were inadequate and that investigations risked going unidentified and unreported. ASIC chair Sarah Court said the failures were unacceptable for a fund of Mercer’s size. “This was not an isolated oversight. It was a sustained systemic issue that continued for years after the regime was introduced, which is unacceptable for a fund entrusted with $80 billion worth of retirement savings for more than a million members,” she said. “These failures undermined a critical safeguard designed to protect consumers and exposed fundamental weaknesses in Mercer Super’s systems and processes.” Ms Court said failures to report serious member-service investigations could allow problems to persist unchecked, increasing the risk of ongoing harm. Justice Button accepted there was no suggestion Mercer deliberately tried to mislead ASIC or that members suffered harm because of the contraventions. But the court said the $10.3m penalty carried enough “sting” and reinforced the need for financial services licensees to operate “joined up” systems so important information was not missed in reports to ASIC. Mercer must also pay ASIC’s agreed legal costs of $1.2m. Mercer Super said it apologises that it fell short of its obligations under the reportable situations regime. “The agreed facts submitted to the Federal Court shows these shortcomings were not deliberate and that Mercer Super did not financially benefit from them,” the fund said. “There is no allegation of financial or non-financial loss to members in relation to this matter.” The penalty will be paid by Mercer and not by the super fund or its members. Mercer is the seventh largest super fund in Australia by members, with more than one million members and almost $80b in assets under management. It is the second major penalty against Mercer in less than two years. In August 2024, the fund was fined $11.3m after admitting it made misleading statements about the sustainable nature and characteristics of some superannuation investment options. ASIC has made member-service failures in super one of its 2026 enforcement priorities. In November 2025, United Super, the trustee of Cbus, was ordered to pay a $23.5m penalty over serious failures in processing death benefits and insurance claims. In May, the Federal Court found Telstra Super failed to comply with internal dispute resolution procedures, with about one-third of complaints made between October 2021 and January 2023 not answered within 45 days and some delayed more than 100 days. A penalty hearing is pending. ASIC has also sued AustralianSuper, alleging delays in processing nearly 7000 death benefit claims, and last year handed down 34 recommendations to trustees to improve death benefit claims handling.