Australia's largest super fund hit with a $27 million fine

Australia's Federal court rules AustralianSuper overcharged 90,000 members $69 million.

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AustralianSuper, the largest superannuation fund in Australia, has been hit with a $27 million fine after the Federal Court found it overcharged tens of thousands of members a total of $69 million.

The charges stem from AustralianSuper’s failure to merge duplicate member accounts, which caused financial harm over a period of nearly a decade.

The Federal Court ruling, delivered by Justice Lisa Hespe, found that AustralianSuper knew as early as 2015 that members had duplicate accounts but did not act promptly to resolve the issue.

Between July 2013 and March 2023, about 90,000 members were affected by avoidable fees, multiple insurance premiums, and lost investment earnings due to the fund’s systemic deficiencies.

Justice Hespe noted that AustralianSuper failed to implement proper rules, processes, or procedures to regularly assess whether merging multiple accounts would benefit members, highlighting a lack of due diligence.

The court ruled that the fund had a duty to act in the best interests of individual members when addressing the issue but failed to do so until late 2021.

An internal email from 2015 revealed that AustralianSuper staff were aware of the issue but did not take action, citing a lack of immediate financial benefit to the fund. The matter was not escalated to senior management until three years later, despite clear signs that the fund was not meeting its obligations.

The Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) jointly investigated the issue, leading to the legal action in 2023.

The court’s decision also includes a $500,000 cap on legal costs for the regulators.

In a statement, AustralianSuper’s current CEO Paul Schroder acknowledged the mistake, apologizing to impacted members and emphasizing that the fund had taken steps to resolve the issue, compensate members, and improve its processes.

“We found this mistake, we reported it, we apologized to impacted members, we compensated them, and we’ve improved our processes to prevent this happening again,” Schroder said.

ASIC Deputy Chair Sarah Court described the fine as a reflection of the severity of the misconduct, aggravated by the fund’s failure to escalate and address the issue promptly once it was identified.

AustralianSuper, which is a not-for-profit industry fund, said members would not see an increase in fees to cover the fine, as provisions for the penalty had already been made in the fund’s 2023-24 accounts.

Despite the hefty fine, the issue underscores broader challenges within the superannuation industry related to multiple member accounts, an issue AustralianSuper is working to resolve as part of its ongoing efforts to improve member services.