Super reform dents AMP

Embattled wealth group AMP expects the federal government’s superannuation reforms to dent earnings by about $10 million.

AMP says it has evaluated the impact of the government’s Protecting Your Superannuation Package. Picture: Hollie Adams

Embattled wealth group AMP expects the federal government’s superannuation reforms for low balance accounts to dent earnings by about $10 million this year, although it will step up actions to retain customers and revenue.

In an ASX statement, AMP said it had completed an assessment of the impact of the federal government’s Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018.

The Bill still requires final approval in the House of Representatives, however, and could be subject to further amendments.

“Based on the amendments passed in the Senate on 14 February 2019, the indicative operating earnings impact on AMP’s retained businesses in FY 19 is expected to be approximately $A10 million (after tax), with an annualised impact of up to $A30 million (after tax) from 2020,” AMP said.

“These estimates are prior to a number of potential mitigants, including offsetting actions to retain customers and revenue, administrative cost efficiencies and the consolidation of low balance super accounts from other industry participants into AMP active accounts.”

The Australian this month revealed AMP was reaping millions in fees every year from zombie superannuation accounts.

The superannuation reforms stem from last year’s federal budget and include handing the Australian Taxation Office (ATO) the power to claw back inactive accounts with less than $6000 and return savings to super customers.

The proposed legislation which also initially included opt-outs from life insurance for low balance accounts has been subject to intense lobbying by industry. Many small superannuation funds use low balance accounts to cross subsidise their active members.

AMP said the new rules would largely impact the group’s Australian wealth management business, which will be required under the legislation to transfer about 370,000 low balance superannuation accounts to ATO.

The ASX statement said the impact on AMP Capital, the real estate and infrastructure division, was “not material”.

AMP has come under fire in the past 12 months for charging advice fees to dead people and where no services were provided, largely as a result of the Hayne royal commission. The group was also in the spotlight for misleading the corporate regulator and is subject to class actions.

This month, AMP posted a 97 per cent slump in net profit to $28 million for the 12 months ended December 31, down from $848m in 2017. Profits were hit by $4 billion in customer outflows from its funds and higher compliance and customer remediation costs.