National Australia Bank pays low interest to superannuation customers
The Australian 12:00am August 13, 2018
Anthony Klan
National Australia Bank has short-changed its super fund members in addition to fee gouging by paying interest rates on simple “cash” investments well below what a mystery shopper was offered after approaching other banks, documents show.
A witness statement by NAB executive Paul Carter filed with the banking royal commission says independent analyst firm Rice Warner had conducted a “no names” inquiry of CBA, Westpac and ANZ to obtain quotes and had “identified that a higher rate may be available” than that which NAB was paying its superannuation members.
The statement says that subsequently, one of NAB’s superannuation arms had negotiated, with NAB, a 26-basis-point increase in the interest rate NAB would pay to its own super members — a move that would see “cash” returns being paid to many members almost double.
NAB’s interest-rate diddling of its own super members, along with its longstanding gouging in “fees” and “charges” of those members, helps to explain why the superannuation of NAB’s own employees is earning an interest-rate return on simple cash investments about 6½ times higher than a public version of the same product.
Fee gouging is a key reason NAB’s MLC Superannuation Fund, which has about 80,000 member accounts holding $18.7 billion, delivered after-fee average annual returns below even the rate of inflation over the decade to June 30 last year.
Royal commissioner Kenneth Hayne has shown mounting exasperation with NAB that — despite repeated public claims from its chief executive Andrew Thorburn that things have changed — the bank instead has frustrated the inquiry by producing documents slowly, flooding it with more than 3000 documents in a week, and even unsuccessfully trying to keep secret explosive documents detailing NAB’s “suspected offending”.
NAB has already appeared before the commission for three days of the 10-day hearings into super — far longer than observers had expected.
The returns paid on cash investments in super have become a key focus for the commission because those investments are very simple and cash has a known market rate, meaning they can be used as a reasonable proxy for how funds are treating their super members across the board.
The Australian revealed in April the big four banks were paying returns on cash at a fraction of market rates — among them NAB, which paid members of its MLC Cash investment option an annual return on cash of just 0.32 per cent in the year to March.
By contrast, the super fund NAB operates for tens of thousands of its employees and their spouses delivered a return, after adjusting for tax, of about 2.11 per cent — 660 per cent more.
Mr Carter’s witness statement says that after the mystery shop by Rice Warner — it does not state why Rice Warner was engaged or by whom — NAB super management arm National Wealth Management Services Limited negotiated the 0.26 per cent “increase in the cash rate offered by NAB”.
The statement says the change would become effective from October 1. That increase, which reverses NAB’s short-changing of its members on the cash interest rate, means investors in the MLC cash investment option would receive an annual return of about 0.58 per cent — still about a quarter of the market rate, a quarter of the rate paid by most so-called “industry” funds and about quarter of that paid to NAB staff.
Mr Thorburn has repeatedly declined to be interviewed by The Australian in recent months and has not responded to written questions.