Could you be owed $3000? Five million Aussies set to sue big banks
Set to be the largest class action in the nation’s history, up to five million Australians could end up receiving over a thousand dollars from the country’s biggest banks.
Expected to launch today, law firm Slater and Gordon will be responsible for a legal action on behalf of around one in three Australian workers who have invested their super with the banks involved.
It is estimated the landmark lawsuits could compensate account holders as much as $3000 back and could cost the banks over $1 billion.
The reason for the lawsuit is that bank-owned super funds have been caught putting members' money into the parent bank instead of the bank that offers the best interest rate – which means many workers are often paid between 0.5 and 1 per cent less interest than they should be.
According to the firm, if someone has $100,000 in cash, a 0.5 per cent difference could make them $3000 out of pocket in six years.
Another study shows that someone with $25,000 in cash in an AMP retail fund would be at a loss of $1600 after five years in comparison to someone in an industry fund, getting just 1.41 per cent interest and higher fees, compared to 2.59 per cent and lower fees.
It is believed that around one in three working-age Australians – which is around five million in total – will be affected in some way as they have super in cash with retail funds, which most of the time are owned by big banks.
Favoured by older Australians, cash is considered to be the safest form of super investment.
The firm has launched a website called getyoursuperback.com where any Australians who fit the criteria by having their super in cash can register as part of an initiative to get as many people as possible.
Ben Hardwick, head of Slater and Gordon’s class actions spoke to news.com.au and said that low-interest rates combined with fee gouging by cash funds would have a negative impact on Australians in retirement.
“This means that millions of Australians are out of pocket and a handful of banks have lined their pockets,” he said.
“Slater and Gordon doesn’t think that’s fair and we are saying, enough is enough.”
The first lawsuit announced today will be against Colonial First State, who are under Commonwealth Bank and AMP. From there, another 18 class actions are expected to follow.
“What funds like Colonial First State have been doing is dumping super with a parent bank such as CBA. The interest from the parent bank is so low that investors in the cash option are receiving rates as low as 1.25 per cent a year. This is even below the RBA cash rate,” Mr Hardwick told news.com.au.
“This rate of return is ludicrously low. Standard bank interest should be around 2.0 to 2.5 per cent. That’s what most banks offer to ordinary customers with their normal term-deposits. And that’s what industry super fund members and some retail fund members have been getting.”
While it’s hard to say how far the class action could go, official data shows that there are 28.6 million superannuation policies held by 14.8 million Australians.
Around 55 per cent of those – or 8.2 million – have at least one retail account and it’s been said that majority of these consist of some form of cash component.
These numbers show that this would be the biggest class action in Australian history.