Industry Super Australia (ISA) has unveiled new research that it claims shows bank-owned super funds are paying "above market rates" to their in-house suppliers for super fund services.
The overpayment for services has cost retail fund members $783 million a year since 2006, or $7.1 billion from 2006 to 2014, said the ISA.
The ISA research used APRA analysis published in 2010 which compared prices paid to independent suppliers and related party (in-house) suppliers by for-profit retail funds and by not-for-profit super funds, updating the ongoing costs through to 2014.
ISA chief executive David Whiteley accused banks of boosting other parts of their business by paying above-market rates for superannuation services.
"The extent of the related party deals exposes the key governance challenge within superannuation. There is an inherent conflict faced by the for-profit sector which must reconcile the competing interests of fund members and shareholders," Mr Whiteley said.
The ISA acknowledged that "all funds outsource administration, asset consulting and fund management services to both in-house and independent or external suppliers", but the APRA analysis found that only the retail sector paid above market rates for in-house services.
"Where banks used independent suppliers, the APRA data found no statistically significant difference in the cost," said the ISA.
"The ISA analysis takes into account the impact of foregone investment due to the leakage caused by overcharging relative to market rates."
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