AMP and Commonwealth Bank have responded to Slater and Gordon's announcement of a potential class action which could see the two parties forced to repay more than $500 million that was unfairly deducted from superannuation fund accounts.
Launching its Get Your Super Back campaign yesterday, Slater and Gordon alleged CBA-owned super fund Colonial First State and AMP Super failed to obtain competitive cash interest rates on cash option funds and charged exorbitant fees.
Slater and Gordon estimates CFS and AMP members have lost up to $500 million from their super accounts. The law firm estimates up to $1 billion in retirement savings has been lost by members of bank-owned super funds.
Colonial First State was placing super with a parent bank where members of the fund's cash option received interest rates as low as 1.25% per year - lower than the RBA cash rate and rates offered on regular term deposits.
Likewise, the Royal Commission revealed members within AMP's cash option were receiving negative returns on the cash held for them by AMP.
In response, AMP said it is committed to acting in the best interests of its superannuation members at all times and acting in accordance with legal and regulatory obligations.
"We understand the proposed 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," AMP said.
It added that administration fees on some of cash investment options have already been reduced to address the issue of negative returns and affected customers are being compensated for lost earnings. Fees on flagship MySuper products have also been cut.
In a brief statement, CBA said it is aware of the potential class action but it had not been served with any legal proceedings and will keep the market informed of developments.
CBA and AMP are the initial targets of the Get Your Super Back campaign, with Slater and Gordon intending to take on other bank-owned super funds in future. The law firm estimates one-third of Australian adults may be eligible to join the action.
Slater and Gordon head of class actions Ben Hardwick said the fee gouging and paying out of un-competitive interest rates for Australians who hold part of their super in cash option funds may have set back the quality of retirement for many Australians.
"This means that millions of Australians may be out of pocket and a handful of banks have lined their pockets. Slater and Gordon doesn't think that's fair and we are saying, enough is enough," he said.
"We don't believe there is any justification for a bank-owned fund member being worse off than industry fund members, especially when they have chosen to invest in a passive cash investment option, which requires the fund to do basically nothing."
Slater and Gordon senior associate Nathan Rapoport added that the claim could be extended to cover any fund with a cash component, where the cash was invested with the parent entity.
"The potential damages from an extended claim would be very substantial, as it could encompass the vast majority of fund members," he said.
AMP has also not received any formal notification of legal proceedings at this stage.