CBA’s Long-Running Superannuation Case Ends With $249 Million Settlement
CBA, Colonial First State and Avanteos reach an in-principle settlement over allegations that members’ retirement savings were invested at below-market interest rates
Commonwealth Bank, Colonial First State Investments and Avanteos Investments have reached an in-principle $249 million settlement to resolve a long-running class action connected to the banking royal commission.
The proceedings began in 2018, following the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry. The proposed settlement was reached without the three companies admitting liability and remains subject to Federal Court approval.
Case centred on members’ retirement savings
The class action alleged that Colonial First State and Avanteos failed to properly manage conflicts between their responsibilities to superannuation members and the interests of their parent company, CBA.
The proceedings focused on certain cash and deposit investments offered through Colonial First State superannuation and wrap products, including CFS FirstChoice and FirstWrap, as well as Commonwealth Essential Super.
According to the allegations, between November 2008 and September 2021, members' retirement savings were invested with CBA at interest rates that were lower than those potentially available elsewhere. The case also alleged that undisclosed payments from CBA created incentives for the superannuation businesses to continue investing members' money with the bank.
Slater and Gordon Lawyers, which brought the proceedings, argued that these arrangements reduced the returns members received on their retirement savings and resulted in losses running into millions of dollars collectively.
Settlement serves as reminder for super trustees
Slater and Gordon said the case centred on whether the interests of CFSIL and Avanteos were properly aligned with their duties to act in the best interests of superannuation members.
The law firm said superannuation trustees must prioritise members' interests over their own and suggested the proposed settlement should reinforce the lessons of the banking royal commission across the industry.
The $249 million agreement now awaits consideration by the Federal Court before it can become final.
What it means for investors
For investors and superannuation members, the proposed settlement highlights the importance of conflict management, transparency and investment returns within superannuation funds. The case also reinforces the potential financial consequences when trustees are alleged to prioritise relationships with related financial institutions over members' interests.
For CBA shareholders, the settlement represents a significant potential cost, although the companies have not admitted liability. The broader impact will depend on the court's approval and the final implementation of the settlement.
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