Bank-owned super funds tell inquiry they charged fees they knew were illegal.
Retail banks have shown the same contempt for their superannuation customers, in some circumstances, as they did for their financial advice clients, the banking royal commission revealed this week.
On Thursday, seasoned AMP Super chairman Rick Allert admitted under questioning that members of an AMP Super Directions product would have been better off keeping their funds in a regular bank account.
Mr Allert said the AMP trustee had recently raised an issue with one of the entities managing AMP clients’ super after media reports revealed a cash option AMP super product produced a negative return of 0.39 per cent over a three-year period.
He told the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry that an AMP entity had agreed to cut its fees from 1.2 per cent to 0.5 per cent after these facts surfaced.
The commission heard that AMP’s superannuation trustee, which is legally bound to represent members, had outsourced all of its operations to other AMP entities, the Sydney Morning Herald reported.
Mr Allert was unable to say how many fees the fund pays to related entity AMP Life for managing the superannuation of tens of thousands of customers.
In earlier news on Thursday, ANZ Bank admitted to collecting more than $2 billion by requiring tellers to encourage customers to roll their superannuation into one of the bank’s own pension products.
In a more revealing admission, however, the bank said the strategy was highly risky with the main threat being that customers would end up worse off when they switched.
The Sydney Morning Herald reported that senior counsel assisting the commission, Michael Hodge QC, tabled an ANZ presentation that stated: “The key risk that the sale of SmartChoice Super presents is that customers switch their superannuation without understanding the potential consequences and end up with a less suitable product than their existing fund.”
Questioned by Mr Hodge as to whether the bank’s head of superannuation, Mark Pankhurst, was aware of this risk to customers, the latter agreed that he was.
Along with the Commonwealth Bank (CommBank), the ANZ has been blocked by the Australian Securities and Investments Commission (ASIC) from selling over-the-counter super products “because of concerns their ‘financial health checks’ left customers thinking they were getting financial advice”.
On Wednesday, it was revealed that CommBank’s subsidiary, Avanteos, kept charging fees to deceased superannuation customers for up to a decade.
“On this (2015) review, the conclusion we made was that the practice should cease and should never have occurred,” CommBank executive Linda Elkins told the banking royal commission.
Although the bank admitted that it had discovered the illegal practice in 2015, fees continued to be charged to dead fund members until recently.
National Australia Bank (NAB) also charged more than 4100 dead super members $3 million in adviser service fees after the trustee knew they had died, SBS reported.
Transcripts are available of hearings earlier this week involving Colonial First State, Catholic Super, SCS Super, Suncorp, Hostplus, Colonial First State, QSuper and Suncorp. Transcripts of Friday’s sessions will be available on Saturday.
A handful of superannuation funds are still waiting to front the commission. Also still anticipating a grilling are the regulators, ASIC and the Australian Prudential Regulation Authority, who will likely be asked why they weren’t tougher in enforcing financial services rules on banks, insurers and super funds.
Has your superannuation fund been quizzed by the banking royal commission? If so, how will the information revealed in the hearings likely affect you? Will you consider seeking advice over the potential illegal charging of fees to your super account?