National Australia Bank’s superannuation trustee, NULIS, has commissioned an independent review into its superannuation business after the corporate regulator identified “breakdowns in internal procedures”.
This follows the Australian Securities and Investments Commission (ASIC) imposing additional licence conditions on the Australian financial services (AFS) licence of NAB's superannuation trustee, NULIS Nominees (Australia) Limited.
The conditions were imposed on NULIS following ASIC's enquiries into a breach reports lodged by NAB’s wealth entities. The breaches involved a breakdown in risk management and communication procedures following the transfer in 2012 and 2013 of all members in a number of products to MLC MasterKey Business Super (MKBS) and MLC MasterKey Personal Super (MKPS).
The regulator said breaches had also resulted from changes made to the death and total and permanent disablement (TPD) insurance of MKBS and MKPS members. Approximately 400,000 members were impacted by the insurance changes.
Acting executive general manager, wealth products, Garry Mulcahy said NAB had made substantial changes to upgrade and simplify its superannuation business over the past five years.
“We’ve merged five of our super funds to create Australia’s largest retail super fund, the MLC Super Fund, with $70 billion funds under management, and we’ve also implemented significant regulatory change, including Future of Financial Advice (FoFA) reforms and Stronger Super,” he said.
“We have improved our structure that will allow us to continue to innovate. The Review will provide independent assurance that our fund governance is delivering for our customers.”
External consultants, KPMG, will conduct the Review with the first report to be provided to ASIC and the Trustee by July 2017.
NAB confirmed that a total of $34.7 million will be paid to approximately 220,000 customer accounts, with the average compensation amount per customer account expected to be approximately $150.
However, the errors will again raise questions about the vertically integrated financial services businesses that Australian banks operate.
According to ASIC, system breakdowns included: inadequate disclosure of insurance changes to members; inadequate training for staff; and insurance policies not being updated.
“NAB’s wealth entities have identified that 10 members’ insurance claims were incorrectly assessed with approximately $1.6 million in members' claims underpaid or declined. NAB has compensated affected members a total of $1.8 million, including interest,” the regulator said in a statement.
“In addition, NAB’s wealth entities identified that over 220,000 member accounts were incorrectly charged planned service fees (PSFs) of approximately $34.7 million between September 2012 and October 2016 in the MKPS and MKBS products.
“Fund members were charged PSFs for the provision of general advice in circumstances where no plan adviser had been appointed to provide such advice. ASIC's report Financial advice: Fees for no service issued in October 2016 (Rep 499) included part of this amount in the estimates of compensation to be paid to consumers for such failures.”
Since the release of that report, NAB has confirmed that it will compensate these fund members for the incorrect charge and have also confirmed the compensation to be paid. ASIC's inquiries into the PSF breaches are continuing.
“The additional conditions imposed on NULIS' AFS licence reflect ASIC's priority of improving compliance and disclosure standards in the superannuation industry, including vertically integrated financial services licensees,” said ASIC Commissioner, Peter Kell.
In related news, ASIC yesterday reported that Bankwest, a division of the Commonwealth Bank of Australia, had refunded approximately 10,800 customers more than $4.9 million after it failed to link offset accounts to home loan accounts for some customers who had open accounts between 2007 and June 2016, resulting in customers being overcharged interest.