A major law firm is launching what it believes to be Australia’s biggest group of class actions yet, which will target some of the country’s biggest banks.
- Group of class actions believed to be biggest ever in Australian history, affecting a third of Australians with superannuation funds
- Slater and Gordon law firm alleges super funds owe more than $1 billion to customers
- Super funds accused of charging exorbitant fees and skimming extra profits from interest on super accounts
It is estimated that the series of legal actions against super funds owned by the big banks could end up affecting one third of all Australian adults — or about five million people.
The law firm Slater and Gordon will allege the funds owe more than $1 billion to customers in over-inflated fees and gouged returns on low-risk cash schemes.
At nearly 65 years old, Ron from the New South Wales Central Coast has had his super with AMP for more than half his life.
He told AM he suspects he has lost tens of thousands of dollars in superannuation fees he should not have had to pay.
“If it was $10 a week over the last 30 years, that’s a lot of money, plus interest,” Ron said.
“I could have that in my bank account now and feel a bit better, that I’ve got bit more money behind me.”
Fees and charges swallowing up ‘measly’ interest
Slater and Gordon says it expects to target Colonial First State (owned by The Commonwealth Bank) and AMP Superannuation first, with other funds to follow.
The firm’s head of class actions, Ben Hardwick, points to evidence given at the banking royal commission as showing that bank-owned super funds charged exorbitant fees and skimmed extra profits from interest on super accounts.
“We saw during the royal commission an example of an AMP cash fund in which the members of that fund were getting a negative return because the fees and charges on those super accounts were swallowing up the measly amount of interest that was being paid out,” Mr Hardwick said.
“A two-person household in Australia spends more money on superannuation fees to the retail funds than they do on electricity.
“We want to recoup some of that money back.”
The firm will allege that fees were exorbitantly high, and some funds gave a return lower than they should have.
Mr Hardwick says some bank-owned super schemes gave returns on low-risk cash funds of as little as 1.25 per cent, when a term deposit at the same bank would pay more than 2 per cent return.
“Over someone’s lifetime a difference of even 0.5 of one per cent can have a material impact on someone’s retirement nest egg.”
Every cent matters
Mr Hardwick says the managers or trustees in charge of super funds are duty bound to act in the best interests of the superannuant.
“The case will allege that the trustee should have done everything within its powers to get the best possible interest rate, because as you know, in retirement every cent matters,” he said.
“The job of a trustee is solely and squarely to look after the interests of the beneficiaries.
“This is a different type of commercial relationship — it’s one of trust, and it goes to the very heart of trust law in Australia.
“We say that the big retail funds have breached that trust, and it’s time to give some of the money back,” he said.
Slater and Gordon believes the claim could be extended to cover any fund with a cash component where the cash was invested with the parent entity, in the same way it alleges Colonial First State did.
“This group of class actions has the potential, in combination, to be the largest in Australian history,” Mr Hardwick said.
AMP and the Commonwealth Bank have been contacted for comment, but it’s understood they are yet to be served with notices of the legal action.