Hundreds of thousands of superannuation fund members are set to receive an increase in their retirement savings under a $249 million in principle settlement of a class action brought by Slater and Gordon Lawyers.
The proceeding, which commenced in 2018 as part of Slater and Gordon's 'Get Your Super Back' series of class actions in the wake of the 2018 Banking Royal Commission, was brought on behalf of group members against Colonial First State Investments Limited (CFSIL), Avanteos Investments Limited (AIL) and the Commonwealth Bank of Australia (CBA).
The settlement, which is subject to Federal Court approval, is the highest ever achieved by Slater and Gordon in a group proceeding.
The settlement was reached with the respondents without admission of liability.
Claims about low interest rate practices and trustee conduct
"At its heart this case was about the alleged conflict between CFSIL, AIL and CBA's interests in profiting from members' savings, and CFSIL and AIL's duties as trustees to do the best they could for their members. The case alleged CFSIL and AIL failed to properly manage that conflict," said Nathan Rapoport, Class Actions Practice Group Leader at Slater and Gordon Lawyers.
"Superannuation trustees must prioritise their members' interests over their own. If any superannuation trustees might be at risk of forgetting the lessons from the Banking Royal Commission, the settlement in this case should serve as a reminder."
The case alleged that group members' retirement savings were reduced through the payment of low interest rates on certain cash and deposit investments with CBA offered through Colonial First State superannuation and wrap products, CFS FirstChoice and FirstWrap and Commonwealth Essential Super, between November 2008 and September 2021.
It was alleged that CFSIL and AIL did not act in the best interests of their superannuation fund members when they invested members' retirement savings with their parent bank CBA without trying to obtain the best interest rates available for their members.
It also alleged that CFSIL and AIL received undisclosed payments from CBA which incentivised them to invest members' savings with CBA at lower rates, and that CBA benefited by obtaining access to members' savings at low interest rates.
Slater and Gordon's case alleged that the cash and deposit investments at the centre of the proceeding did not provide members with the returns they were reasonably entitled to expect, and that in total members lost millions in aggregate retirement funding.
Lead applicants welcome settlement
Lead applicant, Wendy Gibson, joined Colonial's FirstChoice Wholesale Personal Super in 2005 and invested in term deposits offered through the product between 2011 and 2019.
"I was dumbfounded when I first learnt of Colonial's alleged conduct. We must be prepared to stand up for what's right against these big conglomerates," Ms Gibson said.
"I'm glad that we persevered with this case and I'm relieved that it will finally conclude," added Ms Gibson.
Another lead applicant Peter Currie joined Avanteos' FirstWrap Plus Personal Super in 2012 and had money invested in a cash account through the product.
"My focus was on ensuring that the big banks operate honestly, and I hope that they have learnt their lesson," Mr Currie said.
"I hope that group members are happy with this outcome and that this case has come to fruition."
Outcome sends strong message to superannuation trustees
Mr Rapoport said for many people, superannuation is their largest asset aside from the family home, and their best and often only means to fund their retirement.
"This is a great outcome for the many thousands of customers who put their faith in Colonial and Avanteos to look after their financial interests but were alleged to be disadvantaged by the arrangements in place with CBA," Mr Rapoport said.
"The outcome reflects the seriousness of the allegations, the long period of the alleged wrongdoing and the vast sums of members' savings invested by the CFS trustees with CBA."
Mr Rapoport said there are estimated to be more than half a million Australians who may be eligible for a share of the settlement.
"If trustees do not fight for the best interest rate returns on cash and deposit investments, members can lose tens of thousands of dollars by the time they retire. In superannuation, small differences add up. A few hundred dollars today, invested for many years in super, can compound into a much larger amount by the time people retire. This settlement will boost many members' retirement savings so it can grow into the future."
He added that most group members will not need to take any active steps to receive a share of the settlement, which for most people would likely be paid into their superannuation accounts.
"It's important to note that settlement funds will not be distributed until the settlement has been approved by the Federal Court and group members' entitlements are then calculated - a process that will take some time," Mr Rapoport said
Mr Rapoport said the case was part of Slater and Gordon's broader work to rebalance power, hold institutions to account and open up access to justice for more people.
Costs, settlement approval and further information
The class action was funded by litigation funder Augusta Ventures Limited.
The settlement is subject to final documentation and approval by the Federal Court of Australia.
If approved, the settlement funds will be distributed according to a Court‑approved scheme, which will include details on eligibility, payment calculations and the process for distributions to be made to group members.
