The Federal Government has made a move to ban all risk commissions within superannuation in what it says is an effort to put consumers first.
From 1 July 2013, the government has proposed to ban all up-front and trailing commissions for both individual and group risk within superannuation, as set out in the amended Future of Financial Advice reform package.
The Minister for Financial Services Bill Shorten announced the new reforms yesterday, stating that the fees and charges within superannuation come at the cost of foregone retirement savings.
The Association of Superannuation Funds of Australia (ASFA) chief executive Pauline Vamos said the announcement came as a surprise to many people, and that the potential impacts will need to be assessed.
“Certainly there was an expectation that risk commissions in default funds would be banned, but where a person actively seeks advice in relation to increasing their super there was an anticipation that commissions would still be able to be paid,” Vamos said.
“We want to make sure that for many people the payment of an upfront fee does not dissuade them from seeking advice on their options.”
“The last thing we want is that people are encouraged to buy their insurance outside of superannuation,” she added.
The reform package stated that the proposed ban will not extend to risk commissions outside of superannuation, as expenditure on insurance is tax deductible to super funds.
