The largest banks in Australia continue to face fallout from the Royal Commission inquiry into widespread financial misconduct across the sector, as law firm Slater and Gordon announced that it will be launching a class action for the millions of customers who saw poor investment returns from their super funds.
The largest class action in Australian history should see up to five million customers being able to claim some form of compensation, with individual totals running into the thousands of dollars.
Slater and Gordon said that its legal proceedings could benefit about one in three working Australians, which shows the vast scope of the banks’ actions.
The case centers around customers investing superannuation funds in the major banks that posed little return compared to funds in higher-growth facilities. The total payout should top $1bn, which works out to an average award of $3,000 per household.
The inquiry revealed that instead of the major banks putting investors’ funds into the banks with the highest interest rates, they deliberately chose to place them with the parent banks of each fund, costing investors between 0.5% and 1% of the money that they put in.
Slater and Gordon therefore estimates that someone aiming to save $100,000 over six years would lose out on at least $3,000 due to inappropriate fund investing from the banks.
Another case study put forward considered the usage of an AMP retail fund with an interest rate of 1.41%. The fund entailed higher fees compared to a typical industry fund, which would offer an interest rate of around 2.59% as well as lower costs.
Many working Australians ended up with their cash invested in retail super funds owned by the big banks, and with cash funds often seen as the safest form of investment, it may come as little surprise that the class action will affect so many. The law firm has now set up a website, getyoursuperback.com, for those who meet the criteria to register for legal representation.
Ben Hardwick, Head of Class Actions at Slater and Gordon, said that the combination of low-interest rates and high fees will have a vastly negative effect on those saving for retirement unless they can recover some of their costs.
Hardwick lamented the fact that the decisions made by the big banks enabled them to “have lined their pockets” while “millions of Australians are out of pocket.” He confirmed Slater and Gordon’s belief that “enough is enough.”
The first two funds in the firing line are AMP and Colonial First State, owned by Commonwealth Bank of Australia (CBA). A further 18 class actions should follow further down the line as other retail funds and bank-owned supers come into question.
Citing the case of Colonial First State, Hardwick said that all Australians tied to this fund saw their cash invested “with a parent bank such as CBA.” This enabled an interest rate from the parent bank so low that it came under even the standard base rate offered by the Reserve Bank of Australia (RBA).
Rallying against the “ludicrously low” return that investors received, Hardwick went on to say that the standard rates from most super funds are around double those of the ones in question. He added that the law firm will fight to recover the funds lost through mis-selling and mis-investment by the major banks.