The class action alleged the super trustee charged excessive fees as part of arrangements to pay ongoing commissions to financial advisers who did not provide continuing services to customers in return.
The settlement, brought by law firm Slater and Gordon and subject to court approval, relates to fees charged to members of the Colonial First State FirstChoice Superannuation Trust between July 2013 and June 2020.
Over that period Colonial First State was majority owned by the Commonwealth Bank of Australia, which is now a minority shareholder.
The class action alleged Colonial continued to charge thousands of existing members high fees under the commission arrangements despite legislation banning the charging of commissions on new super accounts from 2013 onwards.
It was alleged that Colonial had the power at the time to reduce the fees or transfer existing members to identical products with lower fees and where commissions were not paid, but this did not happen until 2019 and 2020.
Former customer and lead applicant Marcel Krieger joined Colonial's FirstChoice Personal Super after a bank financial adviser recommended the product during a branch visit to the Commonwealth Bank in 2010.
Although the adviser mentioned a commission would be received for signing him up, Mr Krieger said he didn't realise he would be paying ongoing higher fees to fund ongoing commission payments.
"After that initial meeting, I never sought, nor received, any financial advice in relation to my super," Mr Krieger said.
"Prior to this class action, I didn't know that from mid-2013 I was paying higher fees than members who joined the same product after that time."
Another applicant and former customer Jason Burton said he joined FirstChoice Employer Super through his employer in 2005 but did not receive ongoing financial advice.
"I was not made aware that I had the option to switch my super to an equivalent super product with lower fees that did not pay ongoing commission to a financial adviser," Mr Burton said.
Thousands of Australians stand to be eligible for a share of the settlement, which would be returned to their superannuation accounts.
Slater and Gordon Class Actions Practice Group Leader Kirsten Morrison said it was likely some members of the class action who had financial advisors linked to their accounts would have to register to participate in the settlement and confirm they did not receive ongoing financial advice under the commission arrangements.
In a statement, Colonial First State said it agreed to settle the class action with the applicants following a confidential court-ordered mediation on June 16.
"In agreeing to resolve the litigation, CFSIL continues to deny the allegations and makes no admissions of liability or wrongdoing," the fund manager said.
The settlement is the highest ever achieved by Slater and Gordon in a group proceeding, according to the law firm.
Funds will not be distributed until the settlement has been approved by the Federal Court, a process that will take some months.
Slater and Gordon has launched multiple group proceedings against banks and superannuation trustees, including an ongoing class action against CBA and Colonial First State for investing members' retirement savings with its parent bank.
