Australia’s largest industry superannuation fund, AustralianSuper, has been fined $27 million for failing to merge duplicate member accounts. The Federal Court ruled that the fund’s failure led to unnecessary charges for tens of thousands of members over nearly a decade.
Figure 1: Due to their failure to merge duplicate member accounts, AustralianSuper, the country’s biggest industry superannuation fund, was fined $27 million [Image: AustralianSuper]
Federal Court Ruling Against AustralianSuper
Federal Court Justice Lisa Hespe ruled against AustralianSuper on Friday, stating that the fund breached the Superannuation Industry Act. The company admitted that between July 2013 and June 2022, more than 90,000 members had multiple accounts that should have been merged.
- Members with duplicate accounts paid unnecessary administration fees and insurance premiums.
- The total financial loss for affected members reached approximately $69 million.
- AustralianSuper failed to have proper systems to prevent the issue.
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Justice Hespe Condemns AustralianSuper’s Conduct
Justice Hespe strongly criticised for not complying with the law.
“It is inexcusable for it to not have had processes and systems in place to ensure compliance with a specific legislative requirement,” she said.
She also emphasised that the penalty should serve as a warning to other superannuation funds.
“The penalties in this case need to be large enough to deter other superannuation fund trustees from failing to diligently discharge their duties to act in members’ best financial interests,” she added.
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ASIC Takes Action Despite AustralianSuper’s Self-Reporting
AustralianSuper self-reported the issue to the Australian Securities and Investment Commission (ASIC) in December 2021. However, ASIC proceeded with legal action because AustralianSuper had identified the issue as early as 2018 but took three years to report it.
ASIC’s deputy chair Sarah Court criticised the delay.
“ASIC expects that superannuation funds will put their members first and promptly address issues that cause members to face multiple sets of fees and insurance premiums,” she said.
AustralianSuper Apologises and Compensates Members
Funds chief executive, Paul Schroder, acknowledged the company’s mistake and assured that steps had been taken to fix it.
“We found this mistake, we reported it, we apologised to impacted members, we compensated them, and we’ve improved our processes to prevent this happening again,” he said.
Schroder admitted that fund’s system for merging accounts was not effective for years.
“Multiple member accounts are a problem across our industry, and for several years our process wasn’t comprehensive enough to meet our obligations to members,” he said.
Impact on Members and AustralianSuper’s Financial Standing
- AustralianSuper has more than 3.5 million members.
- The fund is responsible for 14.6 per cent of all superannuation accounts in Australia.
- It manages over $340 billion in assets, according to its 2024 financial report.
While AustralianSuper has now compensated affected members, the case highlights ongoing concerns about transparency and efficiency in the superannuation industry.
AustralianSuper to Cover ASIC’s Legal Costs
Along with the $27 million penalty, the fund will also pay ASIC’s legal costs, which have been capped at $500,000.
ASIC hopes this case sets a precedent for stricter accountability in the superannuation sector. The regulator continues to monitor industry compliance and urges funds to take proactive measures to avoid similar issues.
Superannuation Industry Faces Scrutiny
The Australian superannuation sector has faced increasing regulatory scrutiny in recent years. Industry experts warn that funds must ensure they have robust systems to manage accounts properly.
Key takeaways from the case:
- Super funds must actively prevent members from paying duplicate fees.
- Prompt self-reporting of issues is essential to maintain trust.
- Regulatory bodies will take action even if funds self-report mistakes.
Justice Hespe’s ruling reinforces the importance of compliance in the superannuation industry. AustralianSuper has promised to prevent such errors in the future, but the case serves as a stark warning for all superannuation funds in Australia.
