Employees may not be getting the best superannuation option from their employers, with allegations the big four banks are offering incentives for default super to be held with their own managers.
Legal Super, which has $2.2 billion in assets has alleged that companies may be selecting a default superannuation fund for their employees based on commercial considerations rather than superior returns and services.
In a submission to a government discussion paper of super fund governance, Legal Super chairman David Miles says employers may select a default super fund based on which bank they do business with.
AustralianSuper boss Ian Silk told conference delegates last year that the big four banks, ANZ Bank (ASX: ANZ), Commonwealth Bank (ASX: CBA), National Australia Bank (ASX: NAB) and Westpac Banking Corporation (ASX: WBC), were offering incentives to encourage employers to move their employee super contributions out of industry funds.
He says, “Every single day, representatives of the big four banks are knocking on employers’ doors suggesting they transfer the default fund from an industry fund to one of our bank funds.” The bank reps are reported as saying, “And by the way, if you do that, we just might be able to knock a quarter of a per cent or something off your overdraft.”
The banks deny offering cheap funding in return for super mandates, but National Australia Bank’s MLC noted it was convenient for companies to have all their services supplied by one bank.
Legal Super has suggested that companies be restricted, or even banned, from awarding super mandates to banks with whom they do business.
If ever there was a reason to reform Australia’s financial system that is it. From the banks pushing for the ability of their staff to receive commissions for selling financial products to customers, to making it difficult for consumers to switch banks to this latest allegation, it’s clear the big four banks wield an enormous amount of power in our financial system, given their dominance of the home mortgage market and the funds management industry.
Employees can of course take matters into their own hands and nominate a super fund other than their employers’ default super fund to pay their super into. Unfortunately, many are unlikely to, even if they would be better off in the long run.