The corporate watchdog has launched an investigation into whether major banks acted illegally in marketing superannuation products to their small businesses customers.

A survey of 550 small businesses across Australia by research firm UMR has found that banks are offering business owners special discounts on the cost of insurance and business loans if they agree to nominate bank-owned super products as default options for their employees.

The big marketing push could result in billions of super dollars flowing to the banks because workers who don’t nominate a super fund are automatically joined to their employer’s default product.

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ASIC is now investigating the allegations after Industry Super Australia lodged a formal complaint at the weekend.

“We are investigating the issues raised in UMR Research’s report and considering what action might be appropriate on our part,” an ASIC spokeswoman said in an email to The New Daily on Monday night.

“We are also liaising with APRA (Australian Prudential Regulation Authority).”

Under Australian superannuation laws, banks and other superannuation providers are prohibited from offering financial inducements that might persuade business owners to recommend their retirement savings products to employees.

According to the UMR report, the four major banks – Westpac, Commonwealth Bank, ANZ and NAB – are using financial and other incentives to encourage employers to switch their default fund.

In addition to offers of cheap loans and insurance, business owners have been promised tickets to sporting events, free iPads and software, and reduced banking fees, according to the report.

ANZ rejects allegations, others silent

The New Daily sought comment from each of the banks on Monday, but only ANZ denied that it had resorted to such unlawful sales inducements.

“We do not offer inducements to corporate employers in order to win their superannuation business and we comply with all regulations in relation to this,” an ANZ spokesman said.

A Westpac spokeswoman declined to comment, saying that no specific allegations had been made against the bank or its wealth management arm, BT.

A National Australia Bank spokesman directed the The New Daily to the Financial Services Council (FSC) for comment.

The FSC, which lobbies policy makers on behalf of the banks’ superannuation businesses, acknowledged that many types of incentives contravened superannuation laws.

“The law is clear around inducements,” said an FSC spokeswoman.

“If the UMR survey contains any evidence of inducements it is appropriate that the regulator deals with this accordingly.”

More embarrassment for the big banks

Collectively, the findings of the UMR report are another blow to the reputation of major banks in the retirement savings industry.

They also indicate that the big banks have learnt little from the scandals that have undermined the standing of their financial advice arms and brought financial ruin to thousands of customers.

According to the report, around 12 per cent of employers have already been offered product discounts and other kickbacks to overhaul the super arrangements they have in place for workers.

If the ASIC investigation confirms these findings, pressure will probably mount on policy makers to crimp the market power of the major banks in the broader financial services industry.

The revelations are also likely to stoke public support for the push by Senators for a royal commission into wealth management businesses of the banks.

Survey respondents who banked with regional banks did not report having received inducements to switch their superannuation arrangements.

Industry funds call for new laws

David Whiteley.

David Whiteley, the chief executive of Industry Super Australia, called on the federal government to limit the ability of bank-owned super funds to market retirement savings products to their business banking customers.

“In the best interests’ of employees, the law should be changed to prohibit a bank-owned super fund from providing default super services where it is also the provider of business banking services to the employer,” said Mr Whiteley.

“For the vast majority of Australians who leave it to their employer to choose a fund for them, this process promotes consumer confidence in the system which safeguards Australia’s retirement savings.”

Federal Assistant Treasurer Josh Frydenberg has signalled the government’s intention to remove the Fair Work Commission’s role in the setting of default super funds.

However, the minister has not announced details of the government’s planned reforms and whether employees’ retirement savings would be protected from bank inducements aimed at employers.