THE online bank ING Direct will battle it out on superannuation fees as it seeks to make inroads into the $1.3 trillion industry.
The lender that kicked-off high interest online deposit accounts in Australia, also said it had found a way to help ease the nation's funding strain as it channelled more superannuation savings into the banking system.
ING returned to the retail superannuation sector with the launch of a basic balanced-style superannuation savings product that it claimed has no administration or management fees.
About half the funds in the account would be invested directly into a deposit-style cash account, which would be used to fund mortgage lending for ING's banking arm.
"We looked at total funding and a large proportion of those savings were going into superannuation," the chief executive of ING Direct, Vaughn Richtor, said.
The move to dramatically undercut on fees is expected to put pressures on retail-rivals AMP and the major banks that charge administration and account fees for basic superannuation accounts.
Over recent weeks, several bank executives have called for a greater slice of the superannuation industry to be used to fund the banking sector.
The former Treasury secretary Ken Henry recently criticised the superannuation industry for having too much exposure to the sharemarket and said it needed to diversify its investments.
The Financial Services Minister, Bill Shorten, said the ING move to remove superannuation fees on basic superannuation accounts went to the heart of the government's reforms on financial advice and introduction of MySuper accounts.
"We want people to maximise retirement income ... and we're interested in how we exert downward pressure on fees and how we increase competition," Mr Shorten said.
Indeed, much of the motivation for ING returning to the superannuation market was the development of a MySuper-style product.
The move by ING marks a re-entry into Australian superannuation for the Dutch-backed financial services group. For years, the European financial major 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 business OnePath.
However a non-compete clause between ING and ANZ expired earlier this year, meaning ING could again use its own branding to sell wealth management products.
Frequently Asked Questions about this Article…
What superannuation product has ING Direct just launched in Australia?
ING Direct has re-entered the retail superannuation market with a basic balanced-style super savings product that it says carries no administration or management fees.
How does ING’s no-fee super product invest members’ money?
About half the funds in the ING account would be invested directly into a deposit-style cash account, with that cash used to fund mortgage lending for ING’s banking arm.
Could ING’s move to remove superannuation fees reduce fees across the industry?
Yes — the article says ING’s decision to dramatically undercut fees is expected to put pressure on retail rivals such as AMP and the major banks that charge administration and account fees for basic super accounts.
How does ING’s product relate to MySuper and government reform efforts?
ING’s return was motivated by the development of a MySuper-style product. Financial Services Minister Bill Shorten said removing fees on basic super accounts ties into the government’s reforms around financial advice and MySuper, aiming to exert downward pressure on fees and increase competition.
How might ING’s plan help Australia’s banking funding situation?
ING’s chief executive Vaughn Richtor said channeling more superannuation savings into the banking system could ease the nation’s funding strain, because a large proportion of those savings would flow into deposit-style accounts that fund mortgage lending.
Which financial firms are mentioned as likely to be affected by ING’s re-entry into superannuation?
The article specifically mentions retail rivals AMP and the major banks as likely to feel pressure on fees. It also notes ING previously partnered with ANZ in a wealth joint venture (later renamed OnePath after ANZ bought full ownership) and that a non-compete with ANZ has now expired.
What concerns about superannuation investment mix were raised by former Treasury secretary Ken Henry?
Ken Henry criticised the superannuation industry for having too much exposure to the sharemarket and said the industry needed to diversify its investments.
How large is the superannuation industry that ING is targeting?
The article refers to Australia’s superannuation industry as a $1.3 trillion market that ING is seeking to make inroads into.
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