Banking royal commission: Suncorp under fire for double-dipping on fees

A Suncorp executive has admitted the bank may be double-dipping on fees charged to superannuation members.

A senior Suncorp executive has admitted at the banking royal commission that the bank may be double-dipping on fees charged to superannuation members.

Maurice Pinto, who is responsible for Suncorp’s super trustee company, made the admission yesterday while giving evidence as part of a commission probe into the Brisbane-based group’s habit of trousering surplus tax remittances rather than passing them on to fund members. Members of the fund had no way of telling that it was handing over the tax surplus amount to Suncorp every year, Mr Pinto said.

Evidence before the commission revealed Suncorp also delayed moving members across from commission-paying funds into low-fee MySuper funds until three weeks before a deadline last year and provided financial advisers with hit lists of fund members who might be shifted across, putting an end to the lucrative payments.

Mr Pinto said Suncorp collected 15 per cent of all taxable contributions made by savers into the fund, but had for the past five years ended up with a surplus of tax remittances.

Instead of returning the money to members, it paid it on to another company within the group, life insurer Suncorp Life and Superannuation, as a “fee for additional services”.

Yesterday, the commission heard the amount of money involved was as much as $8.1 million 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?” Mr Hodge asked.

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

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.

Documents before the commission appear to show the fee is paid under two different agreements entered into by the fund — one with Suncorp Life and Superannuation and the other with Suncorp Portfolio Services.

“On the face of it the member is paying twice,” commissioner Kenneth 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 hike this to 1.05 per cent.

Mr Hodge put it to Mr Pinto that this “wouldn’t be obvious to members” because Suncorp didn’t identify the amount paid for the so-called “additional services”.

Mr Pinto replied: “No.”

Mr Pinto added that 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.

Mr Hodge also returned to the issue of why it took some retail funds so long to move eligible fund customers from high-fee funds into the new MySuper regime.

The laws gave super funds four years to transfer all assets held in higher-fee legacy default products across to lower-fee MySuper products by the middle of last year. 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 affected by MySuper.

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

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.