The default superannuation fund for retail employees has been accused of delaying and preventing members from moving some or all of their savings to another superannuation fund.
Financial regulator ASIC announced late on Tuesday that it had commenced civil penalty proceedings in the Federal Court against the Retail Employees Superannuation Trust (REST) for making false or misleading representations to members.
The investigation covers 31,882 letters to 24,735 members and uncovered misleading conduct dating back to at least February 2009.
ASIC alleges that, from at least March 2, 2015 to May 2, 2018, REST discouraged, and in many cases delayed or prevented, members from moving their money to a different superannuation fund.
The regulator says these members were denied their lawful rights to superannuation portability and choice of superannuation fund, which had caused members to suffer financial loss.
Another component of ASIC’s case is that REST retained a higher level of funds under management than otherwise would have been the case as a direct result of the alleged misleading representations.
In a statement announcing the civil proceedings, the regulator outlines three ways in which REST misled members – both orally and in writing.
First, ASIC alleges that REST told members that if they remained employed by an employer who continued to make contributions to the fund, then they were required to keep a minimum balance of $5000 with REST.
Second, REST allegedly told members that if they remained employed by an employer who contributed to REST but was happy to contribute to another fund, they needed their employer to sign a declaration that either stated the date the employer stopped making contributions to REST or confirmed the member’s ‘choice of fund rights’ in order to make the switch.
Third, REST allegedly told members who were no longer employed by their REST employer that they needed to provide REST with a separation certificate or confirmation of their termination date from their employer in order to transfer the full balance of their REST account to another super fund.
ASIC says REST was not permitted under the Superannuation Industry (Supervision) Act 1993 to impose these conditions on outgoing transfers.
The regulator said REST retained at least $14.8 million from 1143 members by only allowing them to move some of their savings rather than their entire balance.
It is seeking declarations, pecuniary penalties, and other orders against REST.
The Federal Court has yet to schedule the first case management hearing.
REST expressed disappointment in the proceedings soon after ASIC announced them.
“As a profit-to-member fund, Rest has the best financial interests of members at our core. We are disappointed with ASIC’s decision to launch proceedings about a matter that Rest reported to the regulator, and for which Rest is remediating affected members,” the fund said in a statement.
“The proceedings relate to the disclosure of an internal business process that was removed in May 2018 that required some members to provide an employment termination date or separation certificate to process a rollover of superannuation from Rest into another fund.
“Rest is currently contacting and remediating members who may have experienced a delay in the transfer of their super as a result of the application of this business process between 1 January 2014 and 2 May 2018.”
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