AustralianSuper sued over $69m ‘failures’ to address multiple accounts

Over nearly 10 years, the country’s largest super fund allegedly failed to address multiple accounts for 90,000 customers. ‘This should not have happened,’ it says.

Australian Super is the country’s largest superannuation fund, with more than $300bn in assets under management.

The corporate watchdog is suing AustralianSuper, the nation’s largest superannuation fund, for neglecting for almost a decade to consolidate the accounts of 90,000 members that cost them $69m, sending a warning shot across the bow of the sector to fix the problem of multiple member accounts.

Indeed on Friday the deputy chair of the powerful regulator has also warned the rest of the superannuation industry to “get its house in order” on this issue that can seriously erode superannuation savings.

The Australian Securities and Investments Commission has commenced civil penalty proceedings against the trustee of the $300bn AustralianSuper, alleging failures to address multiple member accounts.

It alleges those affected AustralianSuper members were exposed to “avoidable financial losses” and that AustralianSuper committed serious contraventions of the Corporations Act and the Superannuation Industry (Supervision) Act.

In one internal AustralianSuper email from 2018 and included in ASIC’s court documents a senior executive of the super fund responsible for its brand and reputation called the issue of multiple member accounts an “appalling problem” but by 2019 nothing had been done and one AustralianSuper insider blamed this on ‘time and priorities’.

The ASIC court documents argue that between August 2019 and November 2021, “little work was done by AustralianSuper to investigate and resolve” the issue and that the fund was complying with the law.

“AustralianSuper’s conduct resulted in a large number of members being exposed to avoidable financial losses. Members with unmerged multiple accounts paid multiple administration fees and insurance premiums and lost the opportunity to earn investment returns on those amounts,” ASIC stated in court documents.

ASIC alleges that for almost 10 years, AustralianSuper failed to have adequate policies and procedures to identify members who held multiple AustralianSuper accounts and to merge those accounts, where merger was in the member’s best interests. AustralianSuper then continued to charge multiple sets of fees and insurance premiums to these members.

Between 1 July 2013 and 31 March 2023, approximately 90,000 AustralianSuper members were affected, with total cost to members of approximately $69m.

It is alleged as part of the court case that AustralianSuper was aware as early as 2018 of the number of multiple member accounts within the fund and possible gaps in its policies and procedures. Despite this, It did not take adequate steps to investigate and resolve the issue until late 2021 and early 2022.

“We have done quite a lot of work within ASIC to identify these issues and indeed we put out a report earlier this year really calling on the industry to get its house in order in relation to this significant issue,” ASIC deputy chair Sarah Court told The Weekend Australian.

AustralianSuper isn‘t just the biggest fund in the country, it also has a heavy hitting board of well connected businessmen and union officials such as its chair Don Russell, an ex-adviser to former federal Treasurer Paul Keating, and its deputy chair Michelle O’Neill, who is president of the ACTU. AustralianSuper directors come from both employer and employee backgrounds and include Finance Sector Union national secretary Julia Angrisano, former Linfox and Skilled Engineering executive John Dixon, Jo-anne Schofield, the national president of the United Workers Union and Ai Group chief executive Innes Willox.

In its concise statement lodged with the Federal Court, ASIC says AustralianSuper failed to efficiently identify, escalate and rectify its ongoing failure to comply with section 108A of the Superannuation Act that requires trustees to identify and merge a member‘s accounts within the one fund.

“A superannuation trustee who has allowed members’ superannuation balances to be eroded by multiple fees and premiums as a result of multiple accounts, and who then fails to take the steps identified above, is not a trustee who provides financial services to its members efficiently, honestly and fairly, or with the care, skill and diligence of a prudent superannuation trustee, or who exercises its powers in the best interests of its members,” the ASIC court documents argue.

In a statement AustralianSuper said it regrets that its processes to identify and combine multiple accounts did not cover all instances of multiple member accounts.

“This should not have happened, and we apologise unreservedly to members.” AustralianSuper implemented a member remediation program for this matter earlier this year, which is now substantially complete, it said.

ASIC doesn’t believe multiple member accounts is a problem just plaguing AustralianSuper and that other superannuation funds have allowed this costly issue to fester for many years without taking proper action.

As at June 30 approximately 3 million people had multiple superannuation accounts with a significant proportion of these multiple accounts held within the same fund, and therefore racking up fees and charges for superannuation account holders. Data provided by the ATO shows that, as of May 2023, over half a million members had two or more accounts within the same fund.

As recently as June ASIC publicly warned superannuation trustees to effectively consolidate duplicate member accounts after a recent review identified poor trustee practices resulting in consumer harm. The warning followed an ASIC review of nine trustees, covering both industry and retail funds.