Public lacks legal protection from bank deals

Laws making it unlawful for banks to offer business banking discounts and other incentives to employers in exchange for access to employees’ superannuation are not backed up by penalties, Industry Super Australia (ISA) advice suggests.

ISA say legal advice provided to it by Arnold Bloch Leibler has confirmed that regulators have no power to seek a civil penalty for breach of section 68A of the Superannuation Industry (Supervision) Act 2003 (Cth).

Chief Executive of Industry Super Australia, David Whiteley said there was no civil penalty for breach of section 68A of the Act to deter such behaviour. Furthermore, employees have little practical recourse if their employer is persuaded to switch their super to one of the bank-owned superannuation funds which, on average, have historically produced lower net returns to members, he said.

“Given such deals are generally commercial in confidence, most employees would not be in a position to prove that incentives were offered to an employer to switch to a bank-owned product.”

A recently-published survey of 550 small and medium businesses conducted by researchers UMR found evidence of bank bundling deals:

• 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.
• Just under half those approached say their bank offered them benefits to change funds.
• 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. Some employers report being offered tickets to sporting events.
• 33% of employers offered benefits say they were persuaded to switch to a super fund promoted by their bank, and many more (57%) report that they are still considering switching.

Source: Industry Super Australia.

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