The scandal threatening to engulf Australia’s superannuation industry has spread to another major operator, Australian Ethical, which has apologised for taking almost a year to process a widow’s application to access her dead husband’s retirement savings.

John Street was a member of the ethically branded fund until he died at home in Tasmania in February last year after becoming one of the first people to access euthanasia under the state’s voluntary assisted dying laws.

His wife, Mary-Cate Pickett, notified Australian Ethical of her husband’s death via her lawyer the following month.

But despite her being the sole beneficiary of Mr Street’s super balance, the fund took until February this year to transfer the funds to her.

“It was exhausting. It was very, very stressful,” she said.

“I believe that it’s had an impact on my health long term because of the ongoing stress that I had and the feelings of powerlessness that I had as a result of my interactions with them.”

Australian Ethical, which manages almost $13 billion on behalf of more than 130,000 customers, has apologised to Ms Pickett for what it described as “appalling service” throughout the processing of her claim.

“We fully acknowledge that there were several points of failure to provide the level of service that one could reasonably expect,” it told her in a letter following an internal investigation into her case earlier this year.

In a statement, Australian Ethical said following Ms Pickett’s case it had sought “appropriate and immediate change to our claims and complaints handling”.

“We would like to reiterate our wholehearted apology for the service Ms Pickett experienced throughout the process of claiming her late husband’s account,” the statement said.

“From the beginning of September 2024 all insurance claims and complaints are now handled by our dedicated in-house team.

“We continue to work to reduce the time taken to finalise all claims with the goal of resolving all claims within 90 days.”

Ms Pickett said her husband was a passionate environmentalist and picked Australian Ethical because it promised to invest his super sustainably.

But she believes he would be appalled by how it acted following his death.

“He was always so supportive and loving to me,” she said.

Like many super funds, Australian Ethical outsources parts of its customer administration to third-party operators.

At the time of Ms Pickett’s claim, it had a contract with financial services company Mercer.

Ms Pickett said she had no idea she was dealing with a separate company until she received an email about her application from a claims manager with a Mercer email signature.

“I think it should be done in-house, and if it’s not done in-house then it should be done with a company with a similar level of standards,” she said.

“And there should be better communication between Australian Ethical and whoever is doing their administration.”

In its letter to Ms Pickett, Australian Ethical said her case had “revealed a pressing need for change”.

“We acknowledge we are falling short of the standard of service we aspire to deliver,” it said.

“We acknowledge the existing issues within our claims processing system, which are leading to unnecessary delays.”

The fund also acknowledged it had taken four months just to send Ms Pickett the initial forms to apply to access Mr Street’s super.

“We made an attempt to send the claim forms on June 15. Unfortunately, due to an administrative error, the forms were not attached to the email we sent,” it told her.

“Once we received the necessary documents, it took another 44 days for the claim to be submitted to the trustee for approval.”

Even after it transferred the money to Ms Street, Australian Ethical failed to send her exit statements that were supposed to be automatically generated and emailed.

“This oversight was both avoidable and inexcusable,” it told her.

The fund has since switched to a new provider for administration services, Grow Inc, which Australian Ethical said in its most recent financial statements would deliver annual savings of $3 million.

Mercer did not respond to a request for comment before publication.

The case comes as the Australian Securities and Investments Commission puts the entire industry on notice over its handling of deceased or severely injured customers’ accounts.

Last week, ASIC sued construction industry fund Cbus for unnecessary delays in processing more than 10,000 death and disability insurance claims.

ASIC has said it is investigating other funds over similar delays.

At the heart of the Cbus matter is alleged administration delays at Link Group, a third-party company contracted by the fund to provide administration services.

Superannuation lawyer Paul Watson, who regularly represents clients facing delays in death benefit payments, said the cases highlighted the risks of outsourcing administration.

“The issue we are seeing is that super funds have failed to properly oversee the way that the fund administrator is performing and holding them to account when they have performed badly,” he said.

“Super funds cannot simply sit back and [leave] the business of handling claims to others. They are responsible for the ways that these claims are conducted.”

Mr Watson has called for an industry code of conduct that includes time limits for making administrative decisions.

When asked last week whether he would support such a code, ASIC chair Joe Longo said it was a matter for the industry.

“If the superannuation sector came up with a code that gave additional rights to consumers, then that’s something ASIC would welcome,” he said.

Ms Pickett believes her case should serve as a warning to other customers who have chosen Australian Ethical.

“I think it would be quite a shock for people to know that it’s not as good as it could be and should be,” she said.

She said the funds from Mr Street’s super had since been distributed among his family members and charities that he chose before he died.

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