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Banks still providing benefits to switch default funds
Sixty per cent of surveyed small to medium enterprises (SMEs) have changed their default superannuation fund when approached by their business bankers after being offered a bundle of benefits, according to Industry Super Australia (ISA).
A second ISA report it commissioned by UMR on whether banks continued to be active in recommending default superannuation funds to SMEs and if they continued to offer SMEs benefits for switching their default funds, found not much had changed since 2014.
ISA chief executive, David Whiteley, said as the 60 per cent of SMEs that changed their default fund after accepting benefits in 2016 was up from 33 per cent in 2014, it meant that banks had refined what they were offering up as a bundle.
"One of the implications that could have been drawn from the research is that over the two years the banks have become better at targeting how they bundle up business banking and employee default super," Whiteley said.
"What we wanted to test was the issues that have been raised, have practices changed within the banks two years down the track?
"The context of that somewhat is that over the last two years the banks have become embroiled in a whole series of scandals which have affected all parts of their vertically integrated businesses and of greater concern to us of course has affected their superannuation businesses."
While watchdogs the Australian Securities and Investments Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) did not find such activity from banks, Whiteley said it was difficult to prove banks were providing incentives to switch funds.
"In effect this practice challenges the integrity of the system in the same way unpaid super challenges the integrity of the system," he said.
"Industry super funds are not-for-profit super funds, they're created along with a compulsory super system, they're institutions which have been free of all the scandals, immune from all the scandals seen from the banking sector, they're institutions that have consistently delivered as a sector with significantly superior returns to members."
Whiteley said there should be a mechanism that prohibited the banks that provided the primary business banker from providing default fund services.
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