NAB rejects royal commission call to extend compensation scheme to other super customers

THE former chair of National Australia Bank’s superannuation trustee has rejected a call by the banking royal commission to extend a $122 million compensation scheme to thousands more customers.

THE former chair of National Australia Bank’s superannuation trustee has rejected a call by the banking royal commission to extend a $122 million compensation scheme to thousands more customers.

Counsel assisting the commission Michael Hodge, QC, said on Tuesday that members of one NAB super fund were being compensated after paying fees for services they did not ­receive, but members of a similar fund were receiving no ­compensation.

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Mr Hodge asked Nicole Smith, the former chair of NAB’s superannuation trustee, Nulis, if there was “a distinction” between the two funds and how fees were levied.

Ms Smith conceded “personal” super customers had been misled as they had not been properly informed that they could opt out of the fees.

The customers in question were initially members of NAB’s MasterKey Business Super Fund — a product issued through employers.

People who left their employers were then put in NAB’s ­MasterKey Personal Superannuation Fund. “I’ve thought long and hard about whether or not it (fees for advice) was misleading,” Ms Smith said.

“In hindsight, it should have said ‘you can turn it off’.”

Nicole Smith, former chair of NULIS (NAB's super trustee), appears at the royal commission. Picture: Stuart McEvoy

But Ms Smith argued customers in the MasterKey Business fund had the option to go to their employers to opt out of the fees, so it wasn’t the place of the bank to compensate them.

Employers had the responsibility to ensure services were being provided, she said.

“It wasn’t the same,” Ms Smith said, asked about the difference between the two funds.

“They (fund members) could go to their employer and they could, through their employer, change the fee … if they felt they weren’t getting services.

“For (personal super funds), I believe we should have told members they could turn it off.”

Internal NAB documents ­tabled at the commission show 220,000 personal super fund members were charged $35 million in fees for having access to advisers, when in fact they were not receiving any such a service.

Those customers received ­refunds two years ago, with each receiving about $160.

Two weeks ago, NAB said it would pay them an extra $67 million because they were not told they could opt out of the fees. They will also get an extra $20 million for investment earnings they missed out on.

The royal commission also heard on Tuesday that NAB delayed revealing to the regulator the worst of its superannuation “fees-for-no-service” problems as it sought to avoid being labelled the “worst of a bad bunch”.

Mr Hodge referred to a draft report by the corporate regulator, the Australian Securities and Investments Commission, on lenders charging fees for services they failed to deliver.

The report put NAB “in the middle of the pack” as it had a compensation bill of only $16 million. But the bank was aware it had to pay an estimated $34 million to compensate those 220,000 super customers, Mr Hodge said.

An internal public-relations strategy paper at the time advocated disclosing the full amount, but it noted “we risk being labelled as the worst of a bad bunch”.

But NAB executive Paul Carter, who ran various wealth operations at the bank between 2013 and 2017, said the full compensation payments had yet to be approved.

He added that NAB’s consumer and wealth chief customer officer, Andrew Hagger, had been talking to the regulator about the issue.

Mr Carter also rejected the claim that the lender “systematically” looked for ways to avoid paying back tens of millions of dollars to customers it had wrongly charged.

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