Banking royal commission: Suncorp acknowledges potential fee double-dipping

Suncorp has admitted it may be double-dipping on member fees as inquiry probes the handling of surplus tax payments.

Suncorp has admitted it may be double-dipping on fees charged to superannuation members, after the royal commission examined the Brisbane-based group’s habit of pocketing surplus tax remittances rather than passing them on to fund members.

Members of the fund have no way of knowing it is handing over the tax surplus amount to Suncorp (SUN) every year, the executive responsible for the bank’s super trustee company, Maurice Pinto, admitted this morning.

Evidence before the commission revealed the Brisbane-based bank also delayed moving members across from commission-paying funds into low-fee MySuper funds until three weeks before the deadline last year and provided financial advisers with hit lists of fund members who might be shifted across and stop paying them lucrative trailing commissions.

Mr Pinto, the head of the office of the trustee within Suncorp, told the public hearings that Suncorp collects 15 per cent of all taxable contributions made by savers into the fund, but has for the last five years ended up with a surplus of tax remittances, which it did not return to its members. In fact, it collected this money and considered it was a “fee” for “additional services”.

Yesterday, the commission heard that the amount of money involved was as much as $8.1m a year.

“Do you think there’s any sensible possibility that a member of the Suncorp Superannuation Fund would understand that Suncorp is paying the entirety of the tax surplus every year to Suncorp Life and Superannuation Limited in exchange for the additional services based on that disclosure?” counsel assisting the commission, Michael Hodge, QC, asked.

“Not based on that disclosure,” Mr Pinto said.

“Based on any disclosure?” asked Mr Hodge.

“Not that I can think of, no,” admitted Mr Pinto.

Counsel assisting the commission, Michael Hodge, QC

Mr Pinto was also asked about the biggest single fee the super fund paid to Suncorp, a fee for pricing investment units of as much as $2.7m a year.

The fee is paid for under two different agreements between the fund and Suncorp’s life insurance division, Suncorp Life and Superannuation Limited (the life insurance company) and Suncorp Portfolio Services Limited and the fees exchanged between the two organisations, royal commissioner Kenneth Hayne put it bluntly to Mr Pinto.

“On the face of it the member is paying twice,” Mr Hayne said. “Isn’t that the position — the member is paying for the calculation of applicable unit price because the unit price is diminished?”

Mr Pinto said he was “not sure exactly how” that fee had been calculated.

Mr Hayne said: “Mr Pinto the difficulty is if you’re not certain of it, how can you be certain that the member is not paying twice?”

Mr Pinto agreed: “Yes. I don’t know.”

While in one year, customers were told they were paying a fee of 0.92 per cent, the additional services fee taken from the surplus tax credits would increase this to 1.05 per cent.

“That wouldn’t be obvious to members?” Asked Mr Hodge, noting that Suncorp didn’t identify the amount of percentage page for the so-called “additional services”. Mr Pinto replied: “No.”

Follow the banking royal commission hearings via our live blog

The royal commission also heard Suncorp removed references on its website to its superannuation fees being “low”, and changed the reference to the fees being “competitive”.

Mr Pinto also said he did not know whether Suncorp reported the additional fee to the Australian Prudential Regulation Authority, and said he had not had a discussion with the company’s finance team about how they reported fees to the regulator.

About 75 per cent of administrative services were provided by Suncorp Portfolio Services Limited, and the remaining 25 per cent by Suncorp Life and Superannuation Limited.

Mr Hodge returned to the issue of delay in moving eligible fund customers from high-fee funds into the new MySuper regime — something the commission last week tackled in its gruelling examination of executive from National Australia Bank.

The laws gave all super funds four years to transfer all assets held in higher-fee legacy default products — known as accrued default assets — across to lower-fee MySuper products by the end of July 2017. Many of the largest retail funds waited until the eleventh hour to make the transfer, which boosted profits at the expense of member savings.

Mr Pinto admitted that Suncorp made the transfer between June 9 and June 19 last year — just three weeks before the July 1 deadline.

He was taken to emails the bank sent to financial advisers in October 2013, providing information about clients “impacted by MySuper”.

The bank urged advisers to “call or write to your key MySuper customers and encourage them to make an investment decision”.

“There are great opportunities to identify new insurance needs, collect their superannuation accounts”, and “provide great advice”, advisers were told.

In one email, a financial adviser was told that 42 of his customers had made an investment decision and so would not be moved to MySuper but “the remaining members are in the sights of MySuper”.

Mr Pinto denied that the purpose of the correspondence was to tell advisers to get their clients to make an investment decision, so that the advisers could continue to pocket commissions.