Big Banks Set To Face Big Class Action
This could be the largest class action in Australian history
What you need to know
- Approximately five million Australians have their retirement savings invested in superfunds
- Law firm Slater & Gordon alleges some funds have not obtained competitive interest rates for customers and have charged exorbitant fees
It’s been a bad year for the big banks (if you discount the fact they continue to post multibillion dollar profits). The Royal Commission has been a real hassle for them, and now the evidence that has come out of that process may be being relied upon to launch a class action.
Law firm Slater & Gordon has created a “Get Your Super Back” campaign; a class action that will be brought on behalf of millions of Australians with bank-owned superfunds. The firm said that the first target of the class action would be the Commonwealth Bank of Australia-owned Colonial First Estate and AMP, but at a press conference on Tuesday also said that IOOF and most major retail funds will be in their sights.
Approximately five million Australians have their retirement savings invested in superfunds, known as retail funds, which are generally owned by banks. Generally, these funds will seek out a high interest rate for their customers’ money, up to 2.5%. But, Slater & Gordon alleges that Colonial First Estate and AMP have been placing people’s savings into their parent bank's own accounts, and thus paying measly interest rates, as low as 1.25%.
The law firm’s head of class actions, Ben Hardwick, said that according to their calculations “fund members of Colonial and AMP combined have lost over half a billion dollars from their superannuation accounts” due to these poor interest rates.
Not only have some customers allegedly lost the benefits of a high interest return, they also claim to have lost money from exorbitant fees. For an average full-time worker, a hike in fees of just 0.5% can end up costing them $100,000 at the end of their working life.
Statement from the Commonwealth Bank of Australia
Commonwealth Bank today confirmed it is aware of an announcement by Slater and Gordon that they are investigating potential class actions against superannuation funds owned by financial services companies including the fund operated by Colonial First State.
Commonwealth Bank, or its subsidiaries, have not been served with any legal proceedings.
CBA will keep the market informed of developments.
Statement from AMP
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. We encourage any customers who have concerns to contact AMP directly.
While we have not been served with any proceedings at this stage, we understand the proposed Slater & Gordon class action may be related to issues in our superannuation business that we previously identified and reported to the regulator. As we set out in our submissions to the Royal Commission, we are already fixing these issues and remediating customers.
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.
In July, we also announced that we are cutting fees on our flagship MySuper products, benefiting around 700,000 existing customers as well as new customers, improving member outcomes.