AMP refunds customers into new high-fee super accounts
AMP has placed money owed to former corporate superannuation customers into new accounts run by its own high-fee, low-return eligible rollover fund (ERF).
The small amounts of money will struggle to grow, burdened by high AMP ERF fees that suppress returns. For example, over 10 years the ERF has earned just 1.4% per annum, after investment management and
annual administration fees. These are currently over 3%pa combined for amounts up to $2499.
AMP could have sent the reimbursed 'plan service fees' into members' new superannuation funds, where they had previously rolled over their AMP money. These were owed to members of AMP corporate superannuation plan who joined prior to July 2014. But instead it opened new super accounts in its own ERFs. It wrote to members last year:
"As your account with us is closed and we can't pay super benefits directly to you, we've paid this amount into a new AMP Eligible Rollover Fund [ERF] account that was opened in your name," it told them.
The problem is that ERFs are one of the most expensive sorts of superannuation fund around. Also the AMP ERF's performance has been abysmal for small amounts. The ERF has a scale of different fees and returns for varying amounts.
This means that an AMP Eligible Rollover Fund isn't a good place for superannuation, particularly for a long stretch of time. If AMP has put your money into an Eligible Rollover Fund, it is a good idea to roll it into your active superannuation fund. The company has sent forms to former clients allowing them to get their money out of the account and close it.
ERFs were designed to be a parking place for superannuation when a member leaves a superannuation fund and gives no direction as to how their account is to be administered.
ERFs consist of many accounts with small amounts. Rice Warner describes the ERF segment as "the most expensive in the Australian superannuation market".
AMP says the plan service fee was completed in 2019 and is separate from AMP's fees for no service program that is estimated to be worth over $1 billion.
Once superannuation money is in the tax advantaged superannuation system, it can't be taken out until the member retires or is eligible to access it.
AMP says: "We assessed the options in detail and concluded that the fastest way to return money to clients was through the establishment of an eligible rollover fund. This ensured clients were paid as quickly as possible and allowed them to decide where they would like to transfer their funds.
"The AMP eligible rollover fund is capital guaranteed, which means the starting amount deposited in the fund will be maintained while the customer makes their decision. As always, AMP is ready to help clients who require further support."