Super Trustee Deal Reignites Scrutiny

A $249 million settlement has been reached in a long-running class action concerning interest rates paid on superannuation members’ cash investments, potentially delivering a boost to the retirement savings of more than half a million Australians.

The proceeding, launched by Slater and Gordon Lawyers in 2018 following the banking royal commission, targeted Colonial First State Investments Limited (CFSIL), Avanteos Investments Limited (AIL) and Commonwealth Bank of Australia (CBA). The lawsuit alleged members received lower returns on certain cash and deposit investments with CBA offered through Colonial First State superannuation and wrap products.

Investments were offered through CFS FirstChoice, FirstWrap and Commonwealth Essential Super between November 2008 and September 2021. Slater and Gordon claimed the trustees invested members’ savings with CBA without seeking the best interest rates available and accepted undisclosed payments from the bank that incentivised them to invest members’ savings at lower rates. The proceedings also alleged CBA benefited from obtaining access to members’ savings at low interest rates and that the investments did not provide members with the returns they were reasonably entitled to expect.

Slater and Gordon class actions practice group leader Nathan Rapoport said the case centred on an alleged conflict between the respondents’ interests and their obligations to members. “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,” Rapoport said.

“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.”

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,” Gibson said. “I’m glad that we persevered with this case and I’m relieved that it will finally conclude.”

Another lead applicant, Peter Currie, joined Avanteos’ FirstWrap Plus Personal Super in 2012 and held money 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,” Currie said. “I hope that group members are happy with this outcome and that this case has come to fruition.”

Rapoport said differences in the interest rates earned on cash and deposit investments could have significant consequences when compounded over the period that members remain invested in superannuation. “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.”

Most group members will not need to take active steps to receive a share of the settlement, according to Slater and Gordon, with payments for most people likely to be directed into their superannuation accounts.

However, no settlement funds will be distributed until the Federal Court has approved the agreement and individual entitlements have subsequently been determined.

“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,” Rapoport said.

The class action was funded by litigation funder Augusta Ventures Limited, while the proposed settlement remains subject to final documentation and Federal Court approval. If approved, funds will be distributed under a court-approved scheme setting out eligibility requirements, payment calculations and the distribution process, with further details and key dates expected following the filing of the settlement approval application.