Banks give benefits to employers to switch default super funds

New research released by Industry Super Australia (ISA) shows that banks may be offering benefits to employers to encourage them to switch default superannuation funds.

The survey of 550 small and medium businesses, conducted by UMR, showed that “26% 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,” according to the ISA.

Of those employers approached by the banks, 43% had been offered a benefit for them to change their default super fund.

“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.”

Of those who received offers of benefits, discounts on superannuation fees were offered 38% of the time, with 37% being offered lower insurance premiums for their business. Other benefits included:

  • Free financial advice for employees
  • Free financial advice for the business
  • Discounted interest rate or fees for the business
  • Free or discounted IT products
  • Tickets to sporting events

“UMR’s employer survey gives 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,” said David Whiteley, Chief Executive of Industry Super Australia.

“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.”

A third of employers offered benefits to switch their default super fund have done so, with 57% still considering the offer.

64% of respondents said their business is not covered by an award or workplace agreement restricting the default superannuation fund they can choose from.

The research found two banks in particular recommended employers switch to the bank’s own superannuation fund far more than the other banks. “It’s clear that certain banks are more active than others,” said the report.

The banks are not named in the report, referred to only as Bank A and Bank C. The most common offer to employers from Bank A for switching default fund was lower insurance premiums.

55% of employers said that insurance premiums for their business was an important factor in deciding to change their default superannuation fund. 51% said business interest rates were important.

However David Whiteley said the research found most employers want to do the right thing.

“Fees and returns rank first and second as their most important considerations when selecting a default superannuation fund for their workers,” he said.

Industry Super Australia and the Financial Services Council have previously disagreed over the ability of banks to offer enticements to switch default funds, see Industry vs retail fight over default super funds to continue.

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