Up to five million Australians could get thousands of dollars back from the big banks under what is set to be the largest class action in the nation's history.
Law firm Slater and Gordon will today launch an unprecedented wave of legal action on behalf of around one in three Australian workers believed to have their super invested as cash with the banks, according to a News.com.au report.
TheHerald that New Zealand is not being investigated at this stage because the systems here are different.
It is estimated the landmark lawsuits could get some account holders as much as AU$3000 (NZ$3270) back and end up costing the banks more than AU$1 billion.
An issue is the fact that bank-owned super funds have been busted putting members' money into the parent bank instead of the bank that offers the best interest rate — meaning workers are often paid between 0.5 and 1 per cent less interest than they should be.
The firm estimates that for someone with AU$100,000 in cash just a 0.5 per cent difference could have cost them about AU$3000 in only six years.
In another case study, someone with just AU$25,000 in cash in an AMP retail fund would be almost AU$1600 worse off after only five years compared 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 estimated that around one in three working-age Australians — about five million people in total — have some form of super in cash with retail funds, which are often owned by the big banks.
Cash is considered to be the safest form of super investment and is often favoured by older Australians.
The law firm has set up a website called getyoursuperback.com where anyone who has any part of their super in cash can register as part as a drive to get as many people as possible.
Slater and Gordon's head of class actions Ben Hardwick told news.com.au a combination of low interest rates and fee gouging by these cash funds would hurt 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 to be announced today will be against the Commonwealth Bank-owned Colonial First State as well as AMP. From there it is expected that up to 18 further class actions could follow against other bank-owned and retail funds.
"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 the enormous potential range of the class action is difficult to fully gauge, it is known from official data that there are 28.6 million superannuation policies held by 14.8 million Australians.
It is calculated that about 55 per cent of those — or 8.2 million — have at least one retail account and it is believed that almost all of these would have some cash component. Even by conservatively assuming only two-thirds do, that would mean around five million Australians could potentially join the wave of litigation.
This would make it the biggest class action in Australian history, dwarfing the 10,000 litigants who joined the Black Saturday bushfire lawsuit and the more than 150,000 people who have signed up to the ongoing class action against bank fees.
News.com.au reported that it contacted the Australian Bankers Association and the Financial Services Council — the peak body for super funds — for comment.