Big banks accused of offering inducements to win business superannuation accounts: survey

Australia's big banks are being accused of offering special inducements to businesses to switch the default superannuation fund used for the retirement nest eggs of their employees.

Research conducted for Industry Super Australia said some banks were offering employers discounts on business banking, insurance products, tickets to sporting events and even iPads to win management of their company's 9.5 per cent employer super contribution.

While banks and insurance companies were allowed to compete for default superannuation fund opportunities, they remained prohibited by law from offering inducements to encourage an employer from choosing one super fund over another.

The 1993 Superannuation Industry Act stated the trustee of a regulated super fund must not "offer to give or allow a discount, allowance, rebate or credit" to win business.

The latest allegations of possibly unlawful or unethical behaviour came as major banks including the Commonwealth and National Australia Bank were in damage control over scandals involving their financial planning arms.

Customers hurt by bad financial advice had received millions of dollars in compensation, financial planners had been sacked, and both banks had their reputations tarnished amid calls for a royal commission into white collar crime.

Industry Super Australia chief executive David Whiteley told AM that the research raised serious questions about the ethical behaviour of the major banks.

"It appears they are approaching employers and offering deals to bundle business banking services with employee default superannuation," Mr Whiteley said.

"This could result in employees' super contributions being paid into under-performing bank-owned super funds."

Warnings that employees could suffer

Mr Whiteley said that in offering incentives, banks were making businesses choose between running their companies more efficiently and the best interests of their staff.

"The majority of employers are resisting the benefits that are being offered towards them, but a significant number of employers are undecided about what they will do next," he said.

"But we need to realise that as economic times become more difficult, businesses themselves could come under more economic pressure."

Mr Whiteley warned employees could suffer if their retirement savings were funnelled into an inappropriate fund because their employer had chosen to take incentives.

"It could mean the people may retire with less, they may have to top their super with their own wages, or of course they could find themselves working longer, perhaps even past 70."

Tickets offered to sporting events

While the survey, conducted by UMR Strategic Research of 550 small to medium businesses, did not name specific banks, the finding would be of concern to banking regulators with claims that:

• 26 per cent of employers said a major bank had approached them over the past year about switching their employees' superannuation fund to one operated by the bank;

• just under half of the businesses approached said the bank offered them benefits to switch funds;

• the most common offers included a direct benefit to the business, rather than employees, such as discounts on business banking products, insurance products;

• some employers reported being offered tickets to sporting events or corporate hospitality.

The survey found that two banks in particular were "the most active" in encouraging employers to switch default superannuation funds.

According to the research, the majority of employers surveyed said that offers and incentives had the potential to influence their decision to switch default super funds.

The survey found that 55 per cent saw lower insurance premiums as "extremely important" and "very important", with 51 per cent giving the same response for discounted interest rates or fees on services for loans, overdrafts and credit cards.

The Financial Services Council, which represents banks and insurance companies, says the law banning inducements to employers is clear.

But the FSC wants Industry Super Australia to provide more details on the allegations.

"The information in the survey fails to name any banks or employers involved in inducements. If there is evidence of inducements, the survey should be made public and given to the regulator for action," a spokeswoman told the ABC.

Follow Peter Ryan on Twitter @peter_f_ryan or on his Main Street blog.