Australia’s largest super fund has been taken to court by the corporate regulator over failure to address multiple member accounts.
In an announcement on Friday morning, ASIC alleged for almost 10 years the $300 billion industry fund AustralianSuper failed to have adequate policies and procedures to identify members who held multiple accounts within the fund, nor did the fund merge those accounts when it was in the member’s best interest.
Instead, it was alleged AustralianSuper continued to charge multiple sets of fees and insurance premiums to these members.
The pursuance of court action comes amid the Labor government calling for trustees to improve on member engagement and to better fulfill obligations under the Retirement Income Covenant.
Between 1 July 2013 and 31 March 2023, approximately 90,000 of AustralianSuper’s 3.2 million members were affected, with total cost to members of approximately $69 million.
This is the first case that ASIC has brought in its capacity as a co-regulator with APRA which alleges contraventions of trustee duties under the SIS Act.
The regulator alleged that despite the fund allegedly being aware as far back as 2018 of the number of multiple member accounts and gaps in its policies and procedures, it did not take adequate steps to investigate and resolve the issue until late 2021 and early 2022.
In a statement, a spokesperson for AustralianSuper said the fund “regrets” that its processes to identify and combine multiple accounts did not cover all instances of multiple member accounts.
“This should not have happened, and we apologise unreservedly to members,” the spokesperson said.
AustralianSuper is currently remediating members who held multiple accounts within the fund from 1 July 2014 to 31 March 2023, which the fund said is now “substantially” complete.
In December 2022, AustralianSuper self-reported a potential failure to comply with their obligations to consolidate duplicate accounts to ASIC and was later included in the regulator’s broader review of trustee practices.
This review was published in June where trustees were called on to review their policies and procedures regarding duplicate member accounts.
In May, AustralianSuper stated the total amount to be refunded to impacted members is expected to be around $70 million, with an average of $650 per impacted member. The aim of the fund was “to return these members to the financial position they would be in now if this hadn’t occurred”.
Additionally, the fund said it would not increase administration fees to cover the remediation which would be paid from the fund’s operational risk financial reserve, which is at $670 million according to the fund’s FY22 report.
“Having identified this issue, we have strengthened our processes to identify and combine multiple accounts and remain committed to minimising these for members,” the spokesperson said.
“AustralianSuper will continue to work with ASIC to bring these proceedings to a resolution.”
Research from CoreData and Conexus Financial, the parent company of Investment Magazine, found the drive to minimise costs and scale up via mergers could further harm the member experience, with similar findings coming out of a recent report from Roy Morgan.
According to ASIC, approximately three million people still had multiple super accounts as of the end of last financial year.
The regulator additionally cited data from the ATO which found over half a million members had two or more accounts within the same fund.
ASIC deputy chair Sarah Court said failing to merge duplicate accounts within a fund can have significant financial consequences for members who end up paying multiple sets of fees which can erode member balances over time.
“ASIC expects that superannuation funds will put their members first and promptly address issues that cause members to face multiple sets of fees and insurance premiums,” Court said.
“We expect these issues to be identified and rectified quickly, including compensating members if a trustee has failed to comply with its obligations.”
The date for the first case management hearing is yet to be scheduled and the regulator is seeking declarations, pecuniary penalties and other orders against the fund.