Banks pushing hard for bigger profits
A recent report released by Industry Super claims banks are lobbying government to relax the rules on being able to offer both banking and superannuation products to employers – a strategy known as 'cross-selling'.
At the moment it's illegal for a bank to offer inducements to an employer to use its business banking services and to make its super product the default fund for the business.
But concerns remain that banks will find other ways to convince employers to buy in to such 'vertical integration' tactics (in which banks bundle products to boost profits) if cross-selling is allowed.
Poorer super outcomes
The issue for Industry Super – an industry body who says its objective is "maximising the retirement savings" of the approximately five million industry super members it represents – is that employers may end up putting employees who don't make their own choice into potentially sub-standard default funds.
Under a 'quality filter' administered by the Fair Work Commission, only the best performing funds are meant to become default super funds for employers – and bank funds aren't necessarily the best performers.
As it stands, about 70% of Australian employees end up in their employer's default fund.
Longstanding cross-selling concerns
A number of government inquiries have pointed out the dangers of allowing banks to cross-sell banking and super products, including a 2012 Productivity Commission review which found that "there is no requirement for inducements to be overtly offered for conflict of interest concerns to emerge".
"For example, even without prompting from financial institutions, employers might wish to consolidate all their business (including employee superannuation) with one particular institution. This might be administratively simpler for employers, but not necessarily be in the best interests of employees."
The most recent review into the matter, the Financial System Inquiry, also rejected the idea of banks being able to cross-sell and reported receiving a number of submissions that raised concerns about "superannuation funds offering employers inducements to choose the fund".
According to Industry Super, the lobbying campaign "follows the banks' campaign in 2014 to remove consumer protections for people needing financial advice."