(Adds details on lawsuit, background on legal reforms, inquiry)
Oct 17 (Reuters) – Commonwealth Bank of Australia’s pension unit Colonial First State was sued on Thursday for allegedly failing to act quickly enough to move members out of high-fee default investment options to a simpler product as required by law.
Law firm Maurice Blackburn Lawyers said Colonial’s slow implementation of reforms designed to prevent over-charging of fees had caused substantial losses to over 100,000 members of its FirstChoice Employer Super fund over several years.
The class-action suit would focus on Colonial’s failure to transfer A$3.2 billion ($2.2 billion) of “accrued default amounts” to the lower-cost, higher-performing MySuper product within a statutory deadline, Maurice Blackburn Principal Lawyer Miranda Nagy said. This refers to the total money a customer’s account holds under the default option.
This lapse resulted in FirstChoice Employer Super customers paying higher fees and receiving a lower investment return for an extended period, when they should have been in the MySuper product earlier, she added.
Maurice Blackburn did not say how much damages they were seeking.
The government ordered operators of pension funds, known as superannuation funds in Australia, to move customers with default investment options to the cheaper and simpler MySuper product in 2014.
Last year a public inquiry into financial sector wrongdoing found widespread over-charging of fees and other misconduct throughout the industry, triggering multiple class-action lawsuits and tougher oversight from regulators.
Australia’s largest lender, Commonwealth Bank is in the process of divesting its ownership of Colonial to Japan’s Mitsubishi UFJ Trust and Banking Corp.
CBA did not immediately respond to a request for comment.
Last year, law firm Slater and Gordon Ltd filed a class-action suit against CBA seeking damages of more than A$100 million alleging the bank had invested the retirement savings of thousands of customers into low, uncompetitive interest-returning products.
$1 = 1.4799 Australian dollars
Reporting by Rashmi Ashok in Bengaluru; Editing by Chris Reese
and Stephen Coates