Prohibit employers’ banks from default funds - ISA
Industry Super Australia (ISA) has sought to use new research released by the McKell Institute to defend its position on the need for the Government to retain the existing default funds under modern awards regime.
As well the ISA has claimed that vertical integration in the financial advice space poses significant risks to the default fund selection process.
Referencing the research, ISA chief executive, David Whiteley claimed the McKell data had indicated that the age at which you retired could boil down to the type of super fund you are a member of and pointed to not for profit funds having outperformed funds "owned by the banks" over the medium and long term.
"This alarming finding reinforces the need for a default super safety net to ensure that only the best performing super funds are default funds," Whiteley said. "With eight in ten Australians not choosing their own super fund there needs to be a default super safety net that ensures only the very best performing funds over the long term can be default funds."
He claimed that "bank-owned" super funds were seeking to abolish the safety net and intended to cross-sell their super funds by leveraging existing business banking relationships.
Whiteley said that the problem was also compounded "because of the recent bank-friendly changes to financial advice laws to allow banks and other retail funds to pay sales incentives to staff selling super products and to allow commissions paid on super products to automatically continue when a member is transferred into a pension product with the same provider".
"As ISA has consistently argued, concentration in banking and vertically integrated financial advice businesses means there are significant risks in the default fund selection process," he said.
"In the long run, the only logical solution is to prohibit banks or related entities from providing default super fund services to employees where the bank is the main banking provider to the employer," Whiteley said.
Recommended for you
Treasurer Jim Chalmers has handed down his third budget, outlining the government’s macroeconomic forecasts and changes to superannuation.
Online investment adviser and fund manager Stockspot has introduced Stockspot Super, Australia’s first 'ETF only' superannuation product. superannuation product.
ASIC has called on superannuation funds to improve their oversight of advice fee deductions following an investigation of 10 trustees that found $990 million was charged in one year.
With just 30 per cent of Australians knowing their superannuation balance to the nearest $1,000, Findex has emphasised the role of financial advice in addressing the critical super knowledge gap.
