Industry Super Australia is calling for banks to be penalised for offering business banking deals aiming to see employers switch their employees’ superannuation contribution to bank-owned funds.
Citing legal advice provided by Arnold Bloch Leibler, Industry Super Australia said that there are no civil penalties for those breaching section 68A of the Superannuation Industry (Supervision) Act 2003 (Cth). Industry Super Australia Chief Executive David Whiteley said the act is supposed to prohibit a bank from offering business banking discounts and other incentives to employers in exchange for access to employees’ superannuation.
“Furthermore, employees have little practical recourse if their employer is persuaded to switch their super to one of the bank-owned superannuation funds which, on average, have historically produced lower net returns to members,” Mr Whiteley said.
“Given such deals are generally commercial in confidence, most employees would not be in a position to prove that incentives were offered to an employer to switch to a bank-owned product.”
A recent survey conducted by researchers UMR highlighted evidence of bank bundling deals. The survey of 550 small and medium businesses saw 26 per cent of employers reveal a major bank had approached them in the last year to switch their employees’ default superannuation. Just under half of those approached were offered benefits to entice a change in funds.
Offers from banks were often directed to the business itself, instead of the business’ employees. Perks like business banking discounts and cheaper insurance products, even tickets to sporting events, were said to be on the table.
33 per cent of employers surveyed said they were persuaded to switch super funds after bank promotions and 57 per cent admitted they were still considering a switch.
Mr Whiteley said the Financial System Inquiry Final Report recommended a review of penalties and that the community was calling for “a higher standard of consumer protection which can be enforced by regulators.”
“It would obviously be in the best interests of employees to change the law 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.”