Slater and Gordon on Tuesday launched a class-action campaign, taking on big bank-owned super funds that it said owed Australians more than $1bn.
The first targets of the Get Your Super Back campaign, launched as the Hayne Royal Commission continues to look into misconduct in the banking, superannuation, and financial services industries, are likely to be Commonwealth Bank’s Colonial First State and AMP Super, the firm said.
Millions of Australians, who held part or all of their superannuation in bank-owned funds, lost retirement money as these funds charged exorbitant fees and failed to secure competitive cash interest rates on cash-option funds, the firm will allege in the legal actions.
Slater and Gordon estimates that up to a third of all adult Australians may be eligible to join the series of class actions it intends to file.
“Millions of Australians may be out of pocket and a handful of banks have lined their pockets. Slater and Gordon doesn’t think that’s fair and we are saying, enough is enough,” said Ben Hardwick, head of class actions.
“What funds like Colonial First State have been doing is dumping super with a parent bank such as CBA. The interest from the parent bank is so low that investors in the cash option are receiving rates as low as 1.25% a year. This is even below the RBA cash rate,” he said.
Standard bank interest most banks offer ordinary customers with normal term-deposits should be around 2% to 5%, making this rate of return ”ludicrously low,” he said. The normal interest is what industry super fund members and some retail fund members have been getting, he said.
“In the Royal Commission, it was revealed that some AMP super fund members were getting negative returns on the cash held for them by AMP. We don't believe there is any justification for a bank-owned fund member being worse off than industry fund members, especially when they have chosen to invest in a passive cash investment option, which requires the fund to do basically nothing,” Hardwick said.
Slater and Gordon believes retail fund members should be compensated for the difference between their returns on cash and the returns they should have received if the trustee had done their job properly. Hardwick said that industry funds have shown what normal cash investment return rates should be when trustees do a proper job securing the best available interest rates.
“But, regardless of how you do the maths, when you entrust someone to manage your super – to manage the last 20-30 years of your life, so to speak – you expect that job to be in the hands of someone who you can trust: who you can rely on,” he said. “Some of the bank-owned super funds have broken this trust with Australians. It’s been about lining their own pockets: about propping up their profits and undermining the entire scheme.”
Slater and Gordon estimates Colonial and AMP fund members have lost more than $500m from their superannuation accounts.
“This will fundamentally degrade their retirement. We intend to bring class actions to recoup as much of this money as we can,” Hardwick said.
Senior associate Nathan Rapaport said that the claim could be extended to cover any fund with a cash component that was invested in the parent entity, such as the case with Colonial. He said that since a vast majority of fund members could be affected, the potential damages from an extended claim would be very substantial.
“It’s about time we stood up and said Australians are sick of being taken for a ride. We're happy the Royal Commission has exposed these dodgy practices, but we don't believe exposure is good enough,” Rapaport said. “We now think it's time that Australians got their super back from the big banks.”