AustralianSuper fined $27m for charging 90,000 members duplicate fees

Australia’s largest super fund has been fined after failing to merge duplicate accounts, leading to about $69m in losses for more than 90,000 members.

AustralianSuper has been fined $27m by the Federal Court. Picture: Christian Gilles/NewsWire

Australia’s largest super fund AustralianSuper has been hit with a $27m fine — one of the largest penalties against a retirement fund — after an “inexcusable” failure to merge duplicate accounts held by more than 90,000 members, eroding their retirement savings.

The oversight, which occurred between July 2013 and March 2023, led to 90,788 AustralianSuper members incurring about $69m in losses due to multiple administration fees, insurance premiums and lost investment earnings. AustralianSuper has remediated all affected members.

Federal Court judge Lisa Hespe on Friday ruled that AustralianSuper’s actions breached the fundamental duties and obligations it owed to its members.

The court found that the mega fund lacked the appropriate processes and systems to ensure compliance with regulations, after a 2013 law requiring super funds to identify and merge multiple accounts.

“It is inexcusable for it to not have had processes and systems in place to ensure compliance with a specific legislative requirement imposed expressly and directly on trustees of superannuation funds,” Justice Hespe said.

Justice Hespe said for almost nine years, AustralianSuper failed to identify its noncompliance with the legislative requirements and take steps to remedy the situation in what she described as “systemic failings”.

“The failures should not have happened. The failures are serious and highly concerning.”

In addition to the $27m agreed penalty, AustralianSuper was ordered to cover the Australian Securities and Investments Commission’s legal costs, up to $500,000.

ASIC deputy chair Sarah Court told The Australian that it is one of the largest fines imposed against a superannuation trustee, adding that it is unacceptable for AustralianSuper to have taken a decade to solve the issue.

“One of the issues that really bothers us in this case … is not just that it’s taken such a long time to get these issues remedied, but that there were people inside the business that knew this was an issue and did nothing for years,” she said.

“Funds have an obligation to put the best interests of your members first, first and foremost. Hopefully penalties of this magnitude will start to get trustees to sit up and take notice of these issues.”

Laws introduced in 2013 require super funds to identify members with multiple accounts each year and merge them where appropriate. Since 2021, regulations have also mandated the “stapling” of workers to a single fund to prevent them from unintentionally holding multiple super accounts and incurring duplicate fees.

A joint investigation by ASIC and the Australian Prudential Regulation Authority found that AustralianSuper, which has about 3.5 million members, was aware as early as 2018 that some members held multiple accounts and that its policies had gaps. However, the fund did not take sufficient action to address and rectify the issue until late 2021.

AustralianSuper chief executive Paul Schroder said the fund then informed impacted members, completed a comprehensive remediation program to compensate them, and co-operated with the regulators throughout the process.

Australian Super chief executive Paul Schroder.

“We identified the mistake, reported it, apologised to impacted members, compensated them, and improved our processes to prevent this from happening again,” he said.

“Multiple member accounts are a problem across our industry, and for several years, our process wasn’t comprehensive enough to meet our obligations to members. We’ve fixed that now, and we continue to review and improve our services to provide members with the support and guidance they expect and deserve.”

The Australian Council of Trade Unions (ACTU) and the Australian Industry Group are the owners of the trustee of AustralianSuper. ACTU president Michele O’Neil has served as a director of AustralianSuper since 2021. She declined to comment to The Australian.

Labor-aligned, union-backed superannuation funds have been embroiled in controversy in recent months over their conduct toward members.

More than 2500 Rest Super members who have been wrongly charged insurance premiums since mid-2024 will continue paying the added fees unless they opt out. This followed an accidental “switching on” of coverage by the $92bn fund, chaired by former Victorian Labor deputy premier James Merlino, more than seven months ago.

An independent review by Deloitte of the $94bn construction industry superannuation fund, Cbus, found that the fund did not have proper processes to ensure its “partnership” payments to the construction industry union, CFMEU, were in the best financial interest of members.

The fund, led by former Labor treasurer Wayne Swan, is also being sued by ASIC in the Federal Court for alleged repeated failures in handling insurance claims. The regulator accused Cbus of mishandling $20m worth of death and disability claims, with some cases taking more than a year to make payments to grieving families and people with disabilities.

Ms Court said that it was concerning to ASIC the level of poor conduct that the regulator had uncovered, adding that trustees need to have systems and processes to look after member services.

“It’s a concern to (ASIC), which is why we’ve made it such a priority. We are doing extensive work in superannuation across our regulation and supervision teams, but also our enforcement teams, focusing in on the conduct of superannuation trustees,” she said.

“We’ve put out reports, guidance and wrote to the CEOS of all the major super funds putting them on notice about our concerns about death benefits and processing times.”

AustralianSuper, in November, sought to pre-empt further regulatory scrutiny by vowing to pay millions of dollars in compensation to beneficiaries of deceased members for delays in processing claims.

AustralianSuper, which has $365bn in member assets, has remediated members who held multiple accounts within the fund from June 30, 2014, covering for the period between July 1, 2014, and March 31, 2023.

ASIC and AustralianSuper jointly submitted to the court that penalties totalling $27m would be appropriate.

Originally published as AustralianSuper fined $27m for charging 90,000 members duplicate fees