A national law firm has targeted Australia’s biggest bank as it sets itself up to take on the retail super funds in a historic class action lawsuit.
Slater and Gordon this week announced the launch of its ‘Get Your Super Back’ campaign and said it will involve a series of class actions, with Commonwealth Bank-owned Colonial First State and AMP super likely to be their first targets.
“The firm will allege the big bank-backed super funds failed to obtain for members competitive cash interest rates on cash option funds, and charged exorbitant fees, affecting millions of members who held part or all of their superannuation in bank owned funds,” the firm said in a statement.
Senior associate from Slater and Gordon Nathan Rapoport told ifa sister title Investor Daily that the firm chose AMP and Colonial to be first as they were good examples of wrongdoing by superannuation trustees.
“The evidence at the royal commission really highlighted how in our view the trustee companies are letting down members and not acting in accordance with quite elementary trust law in Australia,” he said.
Mr Rapoport said that their case against Colonial First State was to be focused on the way that trustees invested members' cash.
“Colonial invests that cash with Commonwealth Bank always and it doesn’t shop around and get the best return for members and we believe that's a very clear and simple case of the trustee not acting in the best interest of its member," he said.
The case against AMP is similar but is also focusing on the fees charged by the bank, said Mr Rapoport.
“The evidence we have looked at indicates that AMP funds are charging as much as half a per cent per annum than other comparable funds and even though that may not sound like a lot, over a lifetime it really adds up to quite an enormous amount,” he said.
AMP refuted the claims and said any issues with their business had already been fixed.
“We’re committed to acting in the best interests of our superannuation members at all times and acting in accordance with our legal and regulatory obligations,” the bank said.
AMP said that they were already working with customers to benefit any affected members and to improve member outcomes.
“We have reduced the administration fees on some of our cash investment options to address the issue of negative returns in the small number of funds impacted by this issue. We are also compensating affected customers for lost earnings,” AMP said.
Commonwealth Bank also released a statement confirming it was aware of the announcement but that they had “not been served with any legal proceedings”.
The case would not end at those two banks; Slater and Gordon are looking to see what other funds had not acted in the best interest of members, said Mr Rapoport.
“There seems to be a trend in the way they [retail funds] invest the cash with their parent banks so there is a good chance that we will be launching a case against many others as well,” he said.
If the class action is broadened, it has the potential to be the largest class action law suit ever undertaken in Australia.
“We estimate that there could be in the order around 5 million Australians that have at least one account with a retail super fund, so if we do broaden the case and launch cases against most of the retail funds then that’s the kind of number we are looking at,” Mr Rapoport said.
The allegations arise from evidence given to the royal commission into the banking industry and information released in the Productivity Commission report.
The Productivity Commission report released in May found that retail super funds only brought in members 4.9 per cent per annum in contrast to the 6.8 per cent per annum brought in by industry funds.
In fact, the Productivity Commission report found that retail funds frequently underperformed and charged more fees than industry funds.
Sportsbet is currently tipping Commonwealth Bank to pay back the largest compensation with odds of $1.65, followed by ANZ $4.00, Westpac $7.00 and NAB $8.00.
The Australian Prudential Regulation Authority and the FSC declined to comment and, at time of writing, Colonial First State had not responded to media requests.
Eliot Hastie is a journalist at Momentum Media, writing primarily for its wealth and financial services platforms.
Eliot joined the team in 2018 having previously written on Real Estate Business with Momentum Media as well.
Eliot graduated from the University of Westminster, UK with a Bachelor of Arts (Journalism).
You can email him on: [email protected]
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