AMP gouged $26m out of superannuation savers

The royal commission yesterday probed the sky-high fees paid by savers who have their nest eggs managed by AMP’s super funds.

AMP has admitted to gouging superannuation savers $26 million in fees they should not have paid over the past four years, in fresh revelations at the financial services royal commission.

But the super trustee charged with looking after members’ best interests did not realise there was a problem until about May this year when it was told by another arm of the AMP conglomerate.

The royal commission yesterday probed the sky-high fees paid by savers who have their nest eggs managed by AMP’s super funds, and revealed some investors who held their assets in safe cash instruments were charged fees that gobbled up their entire returns — a problem compounded by the fact AMP did not allow its trustee to control costs its members faced.

It emerged that some investors in their fund’s cash option had their money tipped partly into mortgage-backed securities and bonds just one notch above junk.

The Australian Prudential Regulation Authority has raised the issue of super funds misrepresenting non-cash investments as cash, saying cash should be in the form of cash on hand, deposits, or equivalents that are unlikely to lose their value. AMP Capital is reviewing cash investment options.

Earlier this year AMP’s reputation was shattered after it was revealed its financial planning arm had been charging customers fees without providing them with any service, before misleading the Australian Securities and Investments Commission more than 20 times over the debacle.

The evidence prompted the early exit of chief executive Craig Meller and claimed the scalps of chairwoman Catherine Brenner, general counsel Brian Salter and directors Holly Kramer, Vanessa Wallace and Patty Akopiantz.

Two new fee bungles came to light in yesterday’s hearings, in evidence from Rachel Sansom, AMP’s director of regulatory governance and former director of trustee services.

In the “AMP Capital fee rebate incident”, about $23m of fees were charged for investments into property and infrastructure that should have been rebated back to members but weren’t.

The AMP Life business reported the issue to the super trustee in about May of this year.

In the “AMP Capital expense recovery incident”, about $3m to $3.5m of fees were charged that should not have been.

Ms Sansom said the fee rebate issue had come to light only after ASIC had foisted new rules on super funds forcing them to disclose the costs of indirectly held investments made through platforms and interposed vehicles.

“The trustees do not have any visibility over the indirect costs beyond what they are explicitly told by either AMP Life or AMP Capital?” senior counsel assisting Michael Hodge QC asked.

Ms Sansom said the only way the trustee could find out about the overcharging was that AMP Capital passed the information on to AMP Life, which told the Group Investment Committee, who then told the trustee.

Asked whether the situation prevented the trustee from fulfilling its obligations to act in the best interests of members, Ms Sansom said: “We need to keep working with the parties that we work with to strengthen controls.’’