Australians are being advised to meticulously review their superannuation accounts following revelations that some individuals have experienced near-complete depletion of their retirement funds due to excessive fees. The Australian Securities and Investments Commission (ASIC) has voiced significant concerns that certain superannuation trustees are failing to identify and address exorbitant charges, suspicious transactions, and inappropriate investment switches.
ASIC Commissioner Simone Constant stated that all superannuation trustees must urgently assess and enhance their practices to prevent potential harm to Australians' retirement savings. This warning comes in the wake of the collapses of Shield and First Guardian, which collectively resulted in an estimated $1 billion loss for over 11,000 Australians.
"One member, for example, where almost 100 per cent of their balance was eroded by fees, inappropriate fees that weren't picked up by the trustee," Constant said, highlighting a case where a member's entire super balance was lost. In another instance, members impacted by a specific advice model saw, on average, half of their superannuation savings diminished by fees.
ASIC's investigation, detailed in a 29-page report titled "Safeguarding super: How well are platform trustees monitoring risks to retirement savings," found that too many trustees prioritized maintaining relationships with financial advisers over safeguarding their members' financial futures. The report also noted that advice fee caps remain excessively high, with some trustees having caps as high as $25,000 or seeking approval for $30,000. Furthermore, three trustees had no upper limit on certain percentage-based fees, leaving member accounts vulnerable to substantial deductions.
The regulator is signaling increased scrutiny for trustees, warning that more public disclosures, potentially including naming and profiling specific practices, are forthcoming. ASIC also indicated a readiness to pursue enforcement actions.
"It goes to the heart of those concerns, making sure that members are protected from those egregious fees for no service outcomes, making sure that the flags go up when there's harmful switching, which is what we saw in the middle of the Shield and First Guardian outcomes, and making sure that those member funds are properly held on trust and not eroded," Constant explained.
ASIC is encouraging Australians to engage with their superannuation funds similarly to how they interact with their banks, expecting the same level of protection, service, and support. The Australian superannuation sector manages approximately $300 billion, with advice fees totaling $2.2 billion annually. Constant emphasized the importance of the $4.5 trillion superannuation sector to Australia's economy and its citizens, underscoring the need for it to be managed effectively.
The review, which encompassed funds holding 72 percent of all Australian superannuation accounts, concluded that trustees were not adequately protecting members from risks to their retirement savings.