National law firm Slater and Gordon this week announced the launch of its “Get Your Super Back” campaign and said that it will involve a series of class actions, with Commonwealth Bank-owned Colonial First State and AMP Super likely to be its 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 law firm said in a statement.
Senior associate Nathan Rapoport from Slater and Gordon told Investor Daily that the firm chose AMP and Colonial to be first as they committed 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,” the senior associate said.
Mr Rapoport said that its 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,” Mr Rapoport said.
The case against AMP is also focusing on the fees charged by the bank, according to 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.”
AMP refuted the claims and said that 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 compensate 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 it had “not been served with any legal proceedings”.
The case would not end with those two banks, as Slater and Gordon is looking to see what other funds had not acted in the best interest of members, Mr Rapoport said.
“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,” the senior associate said.
If the class action is broadened, it has the potential to be the largest class action lawsuit ever undertaken in Australia.
“We estimate that there could be in the order around five 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 with $4.00, Westpac with $7.00 and NAB with $8.00.
The Australian Prudential Regulation Authority and the Financial Services Council declined to comment and, at the time of writing, Colonial First State had not responded to media requests.