Banking royal commission: NAB super compensation payouts blow out by $20m

The amount of compensation NAB is to pay members of super funds has blown out by $20m over the past two weeks.

The amount of compensation NAB is to pay members of super funds it ripped off has blown out by $20 million over the past fortnight, evidence at the banking royal commission has established.

Late last month NAB said it would refund $67m to customers who were charged hundreds of dollars in fees for the opportunity to access a financial adviser — even if they didn’t use the adviser’s services.

But this morning counsel assisting the royal commission, Michael Hodge, QC, revealed that on Friday NAB told the inquiry it would now pay customers $87m, after interest and investment losses are included.

The bank has previously said more than 300,000 customers were affected.

NAB executives are under the griller at the commission today amid a continuing investigation by the corporate watchdog into its super business.

Follow banking royal commission developments via our live blog

Evidence at the commission this morning showed how NAB and its financial advisers continue to draw money out of members’ retirement savings without their permission.

The commission also heard that even though the bank first discovered problems with the fees it was charging in 2016, some customers will continue to be charged fees until September.

Members of Masterkey corporate funds run by NAB are stung by an “adviser contribution fee” of up to 5.88 per cent of their balance, even when they transferred out of the company fund and into a personal account, the commission heard.

NAB executive Paul Carter, who is now group exec in charge of consumer and wealth at its Kiwi subsidiary, Bank of New Zealand, but was formerly in charge of its super division, told the commission the fee was “best described as a commission”.

“It is a commission,” he said.

Mr Hodge asked: “You’re saying that because there’s no agreement, as you understand, to provide any service for it?”

“Correct,” Mr Carter responded.

He agreed that the fee was still charged even when a member moved from a corporate fund to a personal Masterkey fund.

“These are legacy arrangements and no longer open to new members,” he said.

The commission also heard that a separate plan service fee continued to be charged when customers moved from a corporate fund to a personal fund, although it was reduced from as much as 1.5 per cent to 0.44 per cent.

Mr Carter said this fee was charged for making an adviser available to provide “general advice relating to superannuation, the investment options, the insurance options that are made available”.

He agreed with Mr Hodge that the fee was charged whether or not any advice was actually given, and continued to be charged until members asked for it to be turned off.

Asked how the bank could be satisfied charging the fee was in the best interests of members — as required by law — Mr Carter said they were fully disclosed and had since been refunded.

“That’s not true, is it,” Mr Hodge responded.

Mr Carter agreed with Mr Hodge that NAB would continue to charge some of the fees until September this year.

Mr Hodge asked: “Do you know why it can’t stop charging those fees until September of this year?”

“No, I don’t,” Mr Carter said.

Earlier, industry super funds scored a big win at the financial services royal commission, with counsel assisting the inquiry, Michael Hodge, QC, saying its investigations found far fewer cases of possible misconduct at the non-profit funds than at their for-profit rivals.

But the industry sector will not be completely spared, with Mr Hodge telling commissioner Kenneth Hayne that over the coming two weeks of hearings he would hear evidence about the employer and union-backed sector’s funding of news website The New Daily and a hard-hitting TV commercial depicting the big banks as foxes in the henhouse.

Meanwhile, retail funds are to be grilled over conflicts of interest — including the continued payment of “very substantial” trailing commissions, five years after new trails were banned — and fees charged to members who received nothing in return.

Opening the hearings this morning, Mr Hodge slammed the entire sector for making it difficult for members to figure out what was being done with their money.

“Trustees are surrounded by temptation”, Mr Hodge said, including the temptation “to choose profit over the interests of members and preference their corporate interests. “Their duties oblige them to resist all of these temptations,” he said.

“What happens when we leave these trustees alone in the dark with our money?

“Can they be trusted to do the right thing with our money?”