Big banks' super fees rip-off exposed

June 2, 2017
Issue 

Australia's four big banks plus AMP are ripping off the country's workers with huge fees charged on their superannuation investments, a recent study has revealed.

carried out by Rainmaker for Industry Super Australia, a mainly union-backed body, shows that the retail super funds, largely operated by the big banks, absorb about half of all fees charged in the superannuation system, despite holding only 29% of retirement savings.

The Big Four banks, ANZ, Commonwealth, NAB and Westpac, alone charged 28% of all fees, totalling $8.7 billion. Overall, the survey found that last year workers paid $31 billion in fees on superannuation worth $2.2 trillion.

That amount of fees is about the same as the cost to the public purse of superannuation tax concessions — mainly benefitting the higher-income brackets — and about half the $45 billion spent on income support for the elderly.

That is because while the not-for-profit sector, including industry, public sector and corporate funds, charged a total of $12.7 billion in fees, $9.9 billion of that went to private sector wealth managers to provide insurance and fund management services. The not-for-profit sector kept only $2.8 billion.

A further breakdown of super costs shows how retail funds gain more in fees: retail super funds, with 29% of funds and about 45% of members, received 50% or $15 billion of all fees. Not-for-profit funds accounted for 42% of funds, 45% of members and collected 42% or $13 billion of fees.

Self Managed Super Funds, which are effectively available only to the wealthy, with millions of dollars to invest in super, had 30% of funds and 10% of members, but received 7% of all fees.

CEO of Industry Super Australia said: "The banks have been getting significant funds from superannuation, yet they have been underperforming the not-for-profit funds.

“The government should be evaluating whether they think it's appropriate for the banks to be generating nearly $9 billion a year from fees on super.

"The government and regulator need to find out if the bank-owned super funds are eroding workers' super savings by generating profits for the parent bank.

"The bank-owned super funds delivered returns of 2% less per annum when compared to industry super funds over 10 years. For an average income earner, this under-performance, if continued, could cost $200,000 in retirement savings over their lifetime.â€

In a commentary piece in the , responding to federal government and retail super industry proposals to replace unions representatives on super fund boards with so-called "independent" directors, Whiteley wrote: "Superannuation is clearly a workplace entitlement, with the Superannuation Guarantee based on wages.

"However, when superannuation is treated as a financial product, the conduct and motivations of the finance sector come to the fore. Instead of directing all profits to members, bank-owned super funds have a conflict of interest, between providing profit to shareholders and delivering profits to members, with these conflicts supposedly managed by so-called 'independent directors' (who are generally drawn from the finance sector).

"Could it be the major banks just want to remove the competition in superannuation and obtain the same 80% market share they enjoy in banking?"

Like the article? Subscribe to 91×ÔÅÄÂÛ̳ now! You can also  us on Facebook and  on Twitter.

You need 91×ÔÅÄÂÛ̳, and we need you!

91×ÔÅÄÂÛ̳ is funded by contributions from readers and supporters. Help us reach our funding target.

Make a One-off Donation or choose from one of our Monthly Donation options.

Become a supporter to get the digital edition for $5 per month or the print edition for $10 per month. One-time payment options are available.

You can also call 1800 634 206 to make a donation or to become a supporter. Thank you.