AMP to pay compensation to super members

AMP is to pay millions in compensation to members who coughed up more in fees than they earned.
AMP is to pay millions in compensation to members who coughed up more in fees than they earned.

AMP will pay $5 million to compensate almost 50,000 superannuation fund members who ended up paying more in fees than the money they earned on their cash investments.

Australia's largest wealth manager has also uncovered further cases of customers being wrongly charged fees, which will lead to about $26 million being paid to millions of super members.

AMP has cut some administration fees after 47,000 people whose retirement savings are wholly invested in cash ended up with three years of negative returns.

AMP super trustees' chairman Rick Allert was asked why members who invested 100 per cent of their retirement savings in cash with AMP ended up with a substantially lower return than if they had just put it in an interest-bearing account with AMP bank.

"You'd have to ask the client," he told the banking royal commission on Thursday.

Senior counsel assisting the commission Michael Hodge QC asked: "Your point is why are they foolish enough to invest their superannuation with AMP?"

Mr Allert said that was not he was saying at all.

"I'm saying you would have to ask the client what's in their mind when they put money into a cash account."

The inquiry was shown statements for one member's $100,000 superannuation account, who Mr Allert noted held a cash account with AMP from at least 2014 to 2018.

"They left the cash there knowing the return they're getting."

The commission heard the issue about negative returns was limited to a small number of AMP's cash investment options.

"Where people have had a negative return, they will have their fees reduced in accordance with this and be compensated for the cost that has been to them for having that negative return over the last three years," Mr Allert said.

About 12,500 current members with $43 million invested were affected, with former fund members to also share in the $5 million compensation.

The administration fees for some cash investment options in two AMP super funds have been cut - in some cases by more than half - to 50-70 basis points.

AMP said cash as an investment option carries relatively low risk but also generates relatively-low returns.

"Super funds, in general, are not designed to be 100 per cent invested in cash," it said.

AMP will also pay compensation of $23 million and $3-3.5 million over issues involving charges by investment manager AMP Capital.

The super trustees' director of regulatory governance Rachel Sansom said it equated to between $6-8 per superannuation member and $1 for the other issue.

Each issue is believed to have affected about three million members.

AMP also said 6300 AMP Flexible Super members may have been charged plan service fees in error after they ceased working for an employer, with the financial impact estimated at $1 million.

The fees-for-no-service scandal revealed by the commission in April led to the departure of AMP's CEO and chair, amid suggestions the company could face criminal charges for lying to the corporate regulator.

Australian Associated Press