Super funds charged fees for no service

Megan Neil
NAB is among a number of funds that have engaged in misconduct in relation to superannuation

The National Australia Bank was worried about financial advisers taking their business elsewhere and taking a financial hit when it continued paying commissions tied to superannuation accounts, an inquiry heard.

The financial services royal commission has uncovered more cases of consumers being charged fees for no service, with the already scandal-hit AMP listed among the culprits in Australia's $2.6 trillion superannuation industry.

NAB, the first to face questioning at the inquiry's superannuation hearing, will pay $87 million to more than 200,000 customers to refund them for charging plan service fees when no adviser was linked to some super accounts.

It is also among retail super funds still paying "grandfathered" commissions to financial advisers, under an exemption for payments already in place when reforms were introduced five years ago.

The inquiry on Monday heard NAB was concerned about the effect of removing grandfathered commissions when it merged five of its super funds into one - the MLC Super Fund - in 2016.

NAB had legal advice the grandfathered commissions could continue, with documents produced to persuade its super trustee that it was in members' best interests.

NAB executive Paul Carter admitted the bank was concerned financial advisers would become "dissatisfied" if it stopped paying commissions and take their clients to different super funds.

He agreed there would have been a financial detriment to the NAB group if the commissions were turned off, in the form of a loss of revenue.

Emails from 2016 show a representative of NAB's super trustee questioning if the material being put forward was "just noise that will make people cranky and look like we're trying to create a diversion".

"Seems a cute argument to make that we should grandfather because these people are getting something in return when commissions are being paid, when all the paper trail will tell a different story."

On the separate issue of plan service fees charged on NAB's MasterKey personal and business super products, documents showed the $1013 earned by one member whose investment was wholly in cash was almost entirely eaten away by $929 in total fees on the account.

NAB has announced its super trustee NULIS will stop all plan service fee deductions and provide refunds, as it had not clearly explained the fee could be turned off if members did not want access to general advice.

Senior counsel assisting the commission Michael Hodge QC said a number of super fund trustees have admitted issues with charging fees for no service.

"AMP, CBA and IOOF have acknowledged fees-for-no-service conduct that we believe must have affected the trustee or trustees of the superannuation fund within their respective retail groups, although they may not have made that specific link in their submissions," he said.

Others mentioned by Mr Hodge included ANZ, Westpac and StatePlus, with the latter setting aside $92 million to cover the repayment of fees for no service to 46,500 members and the costs of a review project.