The new class action alleges Colonial’s slow implementation of the MySuper reforms for its customers led to Colonial breaching its duties to members.
The banking royal commission heard that Colonial, as well as other superannuation funds, failed to meet the January 1, 2014 deadline to move customers to a new, government-mandated regime that ensured members with low balances were charged only low fees.
Maurice Blackburn principal Miranda Nagy said the alleged contraventions led to members in Colonial’s FirstChoice Employer Super paying higher fees and earning less returns for an extended period of time when they could have been in the cheaper, better-performing MySuper product earlier.
“MySuper was introduced to protect the retirement outcomes of Australians by ensuring that consumers weren’t losing money on unnecessary fees and products, and Colonial had a legal obligation over and above a basic moral obligation to move member balances into MySuper at the time that best met their members’ needs, not their own,” Ms Nagy said.
The failure to meet the deadline is potentially a criminal offence under section 29WA of the Superannuation Industry (Supervision) Act and punishable by a fine, the royal commission heard. However, no action has been taken by any regulator over this issue.
In response to the allegations from the royal commission, CBA defended the time it took to transfer customers saying it was not correct for the commission to claim the Australian Prudential Regulation Authority (APRA) wanted it to move the accounts to MySuper earlier.
CBA did not concede its communications to advisers about its MySuper product were misleading, contrary to some admissions made during the royal commission.
APRA also told the commission that “no formal enforcement action was taken because [Colonial] had implemented the process it had agreed with APRA and because the members were dealt with appropriately”.
The class action alleges Colonial breached its duties because it failed to exercise a degree of care, skill and diligence and failed to perform its duties and exercise its power in the best interest of beneficiaries.
Colonial is also accused of failing to give priority to the interests of beneficiaries where a conflict of interest arose between Colonial doing the best thing by its members and by the Commonwealth Bank.
Commissioner Kenneth Hayne made mention of Colonial’s breaches in regards to MySuper in his final report.
“Absent reason to the contrary, and none was identified, trustees were bound to transfer ADAs [accrued default amounts] promptly. CFSIL [Colonial] did not,” he said.
The class action’s lead plaintiff Lesley Coatman said there should be accountability for the alleged breaches.
“It’s clear from both the royal commission and from the case Maurice Blackburn has put together that financial institutions in this country need to do a lot better by their clients, so it is only fair that we’re able to seek accountability for what has happened with Colonial,” Ms Coatman said.
Documents tendered to the royal commission shows Colonial transferred all appropriate customers to MySuper by 2016.
Sarah Danckert is a business reporter.
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