Banking royal commission: Hayne demands fresh AMP, bank documents

Governance issues will feature prominently as the inquiry prepares to grill retail funds over misconduct in the super sector.

The banking royal commission has probed AMP and the big four banks for hundreds of thousands of documents, board minutes and fee and return structures as it prepares to grill executives over misconduct in the $2.6 trillion superannuation sector.

AMP, the nation’s largest for-profit super manager, and other major retail super providers Westpac, Commonwealth Bank, National Australia Bank and ANZ, have all been served wide-ranging notices to produce information relating to their superannuation divisions ahead of the fifth round of royal commission hearings that begin next month.

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Governance issues relating to trustee duties to act in the best interests of members are expected to feature prominently in the hearings. The Australian can reveal the royal commission in the past few weeks has probed AMP and the major banks on fees being charged to super members where no service has been given, the performance — or entrenched underperformance — of investment platforms, the retail sector’s tardy approach to the legally required MySuper transition to low-fee funds, and high fees being charged for low returns.

Although the retail providers have been preparing executives for an appearance at the royal commission, it will not be known what company case studies will be examined publicly over the fortnight starting on August 6 until Kenneth Hayne’s inquiry publishes the list of case studies for round five.

Westpac, the only big four bank to remain committed to its superannuation business, has been served with notices to produce information related to its BT Financial Group division.

AMP, which has already had its reputation shredded during the ­financial planning hearings, has been heavily targeted for its superannuation dealings.

The royal commission has been targeting the same issues at all the major retail super providers, and has collected piles of board minutes and thousands of documents that detail specific fees levied on customers and investment performance data.

According to inquiry sources, the royal commission is taking a keen interest in the way for-profit trustees govern themselves.

“It’s been thousands and thousands of documents,” one said.

Due to the way the royal commission issues its notices to produce, which are numbered sequentially, the industry can tell how many notices have been issued in total across all companies.

“The numbers keep jumping and jumping. It’s going to be a mega-round,” an inquiry source said. “The attention on this round is going to be astronomical because of the political plays involved.”

Both sides of the super sector are being probed, with the union-and-employee-backed industry fund sector and for-profit retail fund sector both expected to receive a drubbing at the hearings.

The Productivity Commission’s landmark inquiry on the superannuation system, which recently released a draft report, has been informing much of Mr Hayne’s inquiry. The damning report into superannuation found entrenched overcharging and underperformance in the for-profit fund sector, a tail of underperforming trade union funds that refuse to merge despite it being in their members’ best interests, and an industry happy to preside over a system that acts as an “unlucky lottery” for many savers.

Under the law, superannuation trustees in charge of managing the retirement savings of members must act in the best interests of their members. However, for-profit companies listed on the stockmarket, such as AMP and the big four banks, also have a fiduciary duty to act in their shareholders best interests.

The latest data from SuperRatings shows super funds run by CBA, ANZ, NAB, Westpac, AMP and IOOF — another large retail super manager — were consistently among the worst performers over the past 15 years. Retail fund fees have been twice as high as non-profit industry fund fees.

Meanwhile retail super providers have been sucking out profits from their superannuation divisions at the same time returns have underperformed.

As revealed by The Australian, CBA’s superannuation, wealth and asset management subsidiary, Colonial First State Investments, paid out 98 per cent and 93 per cent of its profits back to the parent bank over the last two financial years — worth more than half a billion dollars that did not go back to member savings accounts.

The Australian also recently revealed that AMP, which has $118 billion in super funds under management, makes close to $100 million in fees every year off its more than 1 million low-balance funds with less than $6000 in savings.

AMP has also struggled to provide its members with funds that best the industry average. Excess fees and insurance premiums on the 10 million lost and forgotten accounts in the system cost Australian savers $2.6bn every year, hitting younger savers and low-­income workers the hardest.

The corporate watchdog has also been questioning superannuation executives, including those from the scandal-hit AMP, for apparently deliberate fee-gouging of savers by delaying their savings into low-fee MySuper accounts.

As revealed by The Australian, the Australian Securities & Investments Commission believes a number of retail super fund managers deliberately dragged out a move to transition billions in super assets out of high-fee legacy products and into low-fee accounts, as was required by reforms passed by the Gillard government in 2012. A number of for-profit super funds took until the eleventh hour of the four-year transition period to transfer these funds, meaning customers paid more in fees and companies booked higher profits off their retirement savings.