ASIC to investigate big banks over MySuper delays
Retail funds were slow to move members into MySuper products, costing consumers up to $1.8 billion in fees.
The Australian Securities and Investments Commission is investigating why Australia's retail super funds, most of which are owned by the big banks, took so long to move their members into low-fee MySuper products, in comparison to industry funds which were much quicker to implement the changes. Reforms introduced in 2013 required super funds to move members who were with default options into low-fee MySuper products by 1 July 2017.
MySuper products were introduced to provide a no-frills, low-fee basic super option for consumers who are unable to, or don't want to, choose their own super fund. While most of the industry funds had moved their members from default funds into MySuper products by July 2016, this as not the case for retail funds. By this date the not-for-profit funds had moved almost all their members with default funds over to MySuper products, compared to retail funds which had only moved 43%.
According to Rainmaker research, this delay by the retail funds could have cost consumers up to $1.8 billion in fees over the four year period. This is because MySuper products are estimated to charge 30% less in fees than the higher-cost default options.
Industry Super public affairs director Matt Linden welcomed the corporate watchdog's investigation into the retail funds, and raised grave concerns about the Government's involvement, saying, "This fee gouge is another grave episode in a long series of shocking bank behaviour."
"In delaying the transfer of legacy super accounts, the banks potentially were again sneakily boosting their profits at the expense of the retirement incomes of ordinary Australians. The not-for-profit industry funds, on the other hand, did the right thing, swiftly moving their members across to low fee products," said Linden.
Despite the retail funds and big banks repeatedly making headlines for misconduct towards their members, Superannuation Minister Kelly O'Dwyer in November 2016 said the Government was committed to "lift superannuation funds to at least the same standard as other financial services organisations like banks and life insurance companies."
Linden said the industry super fund has grave concerns about the Government's intentions to make not-for-profit super funds more like the banks, saying " ...the Government has a bill before parliament that will see the retail fund boards – which oversaw the fee gouge – remain virtually unchanged while disrupting industry funds by imposing quotas of independent directors that, in the retail sector, have failed to protect member interests.
"The Government should withdraw its bills and follow the money trail from bank-owned and other retail super funds to shareholders and executives at the expense of their members’ retirement savings," said Linden.