Massive $249 Million Class Action Settlement for Hundreds of Thousands of Aussie Super Fund Members After Banks’ ‘Dodgy Practices’ Left Them Shortchanged
- Hundreds of thousands of Australians to share in massive $249 million class action settlement after super fund members alleged deliberate investment choices by Commbank left them out of pocket
- Allegations centre on Colonial First State Investments Limited and Avanteos Investments Limited’s failure to act in the best interest of their fund members, with ‘undisclosed payments’ from Commbank at the heart of the controversy
- Settlement reached without admission of liability, but lawyers claim ‘dodgy practices’ by banks and super funds have ‘ripped off’ ordinary Australians
- Case one of many to emerge from 2018 Banking Royal Commission, with lawyers warning of ‘small differences’ in superannuation adding up to ‘tens of thousands of dollars’ in lost savings
The settlement is a major victory for hundreds of thousands of Australian super fund members who alleged that their potential retirement savings were deliberately whittled away by a series of questionable investment choices made by Colonial First State Investments Limited (CFSIL) and Avanteos Investments Limited (AIL).
The two companies, which are part of the Commonwealth Bank (Commbank) group, have agreed to pay out a staggering $249 million in a class action settlement, without admitting liability.
The allegations centre on CFSIL and AIL’s decision to invest members’ retirement savings with Commbank, without trying to obtain the best interest rates available. According to Slater and Gordon Lawyers, who represented the plaintiffs, this resulted in millions of dollars in lost aggregate retirement funding.
The funds allegedly received undisclosed payments from Commbank, which incentivised them to invest in this way.
The class action was one of many launched in the wake of the 2018 Banking Royal Commission, which laid bare some of the ‘dodgy practices’ that have seen ordinary Australians ripped off by unfair conduct in the banking, superannuation, and financial services industry.
The alleged conduct between Commbank and the super funds took place between November 2008 and September 2021, with one lead applicant having a cash account with an AIL wrap product for nine of those 12 years.
Another lead applicant, Wendy Gibson, joined Colonial’s FirstChoice Wholesale Personal Super in 2005 and invested in term deposits offered through the product between 2011 and 2019.
Gibson said she was ‘dumbfounded’ when she first learnt of Colonial’s alleged conduct and praised the perseverance of the plaintiffs in pursuing the case.
Slater and Gordon Lawyers Class Actions Practice Group Leader Nathan Rapoport said the massive timeframe of alleged misconduct was one reason the payout was so large.
‘The outcome reflects the seriousness of the allegations, the long period of the alleged wrongdoing, and the vast sums of members’ savings invested by the CFS trustees with CBA,’ he said.
Analysis: What This Means for Australia
The settlement highlights the need for greater transparency and accountability in the superannuation industry. As Rapoport noted, small differences in superannuation can add up to tens of thousands of dollars by the time people retire.
This case serves as a warning to trustees to fight for the best interest rate returns on cash and deposit investments, or risk leaving their members shortchanged.
Security analysts say the case also raises concerns about the lack of regulation in the industry.
‘This settlement is a wake-up call for regulators to take a closer look at the practices of banks and super funds,’ said one analyst.
‘It’s clear that there’s a need for greater oversight to prevent this kind of behaviour in the future.’
Industry observers believe the settlement will have far-reaching implications for the superannuation industry, with potentially hundreds of thousands of Australians affected.
‘This is a major victory for consumers, but it’s also a reminder that there’s still much work to be done to protect Australians’ retirement savings,’ said one observer.
The settlement is subject to final documentation and approval by the Federal Court of Australia.
If approved, the settlement funds will be distributed according to a court-approved scheme, which will include details on eligibility, payment calculations, and the process for distributions to be made to group members.
As the superannuation industry continues to grapple with the fallout from the Banking Royal Commission, this settlement serves as a timely reminder of the need for greater transparency and accountability.
With hundreds of thousands of Australians set to benefit from the payout, it’s clear that this case will have a lasting impact on the industry.