ISA attacks banks on ‘bundling’
The major banks remain guilty of bundling deals to employers capable of influencing them to switch default superannuation products, according to new research released by Industry Super Australia (ISA).
The research, released today, adds new momentum to the ISA's on-going campaign against the banking sector at a time when the Financial Services Council (FSC) is continuing to press for the default funds under modern award regime being opened up to all eligible MySuper products.
The ISA has released research it commissioned by UMR to claim that the business bundling by the major banks represents a real problem and that employees could be "switched into superannuation funds irrespective of the impact on their net returns and long term retirement savings".
The survey of 550 small and medium business revealed 26 per cent of employers surveyed said that a major bank had approached them about transferring their employees' default superannuation to the bank's own retail super fund in the last year and that just under half those approached said their bank offered them benefits to change funds.
The analysis said the most common offers made by the banks involved a direct benefit to the business rather than employees, such as discounts on business banking and insurance products with some employers reporting being offered tickets to sporting events.
The ISA/UMR survey found that 33 per cent of employers offered benefits said they were persuaded to switch to a super fund promoted by their bank, "and many more (57 per cent) report that they are still considering switching".
Commenting on the survey, ISA chief executive, David Whiteley said it gave rise to serious questions about the banks' behaviour.
"It appears they are approaching employers and offering deals to bundle business banking services with employee default superannuation," he said. "This could result in employees' super contributions being paid into bank-owned super funds, which have on average historically produced lower net returns to their members."
"In the best interests' of employees, the law should be changed to prohibit a bank-owned super fund from providing default super services where it is also the provider of business banking services to the employer," Whiteley said.
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