ING Direct goes for bite of lucrative retail super market

THE online bank ING Direct plans to launch its first retirement savings product within months in an attempt to gain a slice of the nation's $360 billion retail superannuation market.

By InvestSMART · 24 Jul 2012

By InvestSMART ·
24 Jul 2012

Comments

THE online bank ING Direct plans to launch its first retirement savings product within months in an attempt to gain a slice of the nation's $360 billion retail superannuation market.

It will be a re-entry into superannuation for the Dutch-backed ING Group. For years the European financial giant operated a wealth management joint venture with ANZ. This was dissolved three years ago when ANZ paid $1.8 billion to move to full ownership and renamed the wealth business OnePath.

It is understood that a non-compete clause between ING and ANZ that was part of the transaction expired earlier this year. This means ING will again be able to use its own branding to sell wealth management products.

Much of the motivation for ING returning to the superannuation market was the development of a MySuper style product. This low-cost default account is aimed at delivering basic retirement savings needs and was the centrepiece of the Cooper review into the nation's super system.

A spokesman for ING Direct declined to comment on the bank's plans for superannuation but said the online specialist was planning to take a major step into becoming a full-service retail bank.

Since launching in Australia early last decade, ING Direct has emerged as the nation's sixth biggest bank in terms of retail deposits. It has more than $18.7 billion in household deposits, slightly behind Bendigo and Adelaide Bank on $18.8 billion.

Even without a branch network ING Direct has built up a $38 billion mortgage book.

Banks have placed renewed hope on wealth management as profit growth in other areas of banking, such as lending, slows.

Superannuation savings are expected to increase from about $1.2 trillion today to more than of $6 trillion by 2030.

About a third of the savings are held in the hotly contested retail superannuation market.

For banks, wealth management has long been the holy grail for a source of potential earnings power, but the businesses have often delivered disappointing returns for shareholders.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

What retirement savings product is ING Direct planning to launch in Australia?

ING Direct plans to launch its first retirement savings product within months as it targets a slice of Australia's retail superannuation market, which the article describes as a $360 billion segment.

Why is ING Group re-entering the Australian superannuation market?

ING's re-entry is driven largely by the development of a MySuper-style product — a low-cost default account aimed at basic retirement needs — and because a non-compete clause with ANZ expired earlier this year, allowing ING to sell wealth products under its own brand again.

What happened to the previous ING–ANZ wealth management joint venture?

ING previously operated a wealth-management joint venture with ANZ that was dissolved about three years ago when ANZ paid $1.8 billion to take full ownership and rebranded the business OnePath; the non-compete from that deal has now expired.

Has ING Direct commented publicly on its superannuation plans?

A spokesman for ING Direct declined to comment specifically on the bank's superannuation plans, but said the online specialist is planning to take a major step toward becoming a full-service retail bank.

How large are ING Direct's retail deposits and mortgage holdings in Australia?

Since launching in Australia, ING Direct has grown to hold more than $18.7 billion in household deposits — slightly behind Bendigo and Adelaide Bank at $18.8 billion — and has built a $38 billion mortgage book despite not having a branch network.

How attractive is the retail superannuation market for banks and wealth managers?

Banks see wealth management and retail super as an attractive source of future earnings because lending growth is slowing. The article notes superannuation savings are forecast to grow from about $1.2 trillion today to more than $6 trillion by 2030, with roughly one-third held in the retail super market.

What is a MySuper-style product and why does it matter to investors?

A MySuper-style product is described as a low-cost default account designed to meet basic retirement savings needs; it was a key recommendation from the Cooper review and is important because it targets cost-conscious default super members seeking simple, lower-fee retirement options.

Have wealth management businesses consistently delivered good returns for bank shareholders?

While wealth management is often seen as the 'holy grail' for potential earnings, the article cautions that these businesses have frequently delivered disappointing returns for shareholders in the past.