The Government has stepped back from its blanket ban on individual risk commissions in super – but the complete ban on group risk commissions remains in place.
In a statement released yesterday, Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, announced the Government had adjusted its proposed ban on life insurance commissions within super.
“The ban will apply to commissions on group life insurance in all superannuation products (including both Default/MySuper products and Choice products) and to commissions on any life insurance policies in a Default/MySuper product from 1 July 2013,” Shorten said.
Effectively, this means the only commissions that will be allowed in super from 1 July 2013 will be individual life commissions in self-managed superannuation funds and Choice funds.
Association of Superannuation Funds of Australia chief executive Pauline Vamos was glad to see the exception on individual policies, and said that it removed the problem of regulatory arbitrage.
“With commission only being paid on non-superannuation individual policies, there was a risk that the superannuation industry would be selected against. [Advisers would] put their unhealthy clients in super, and their healthy clients outside of super. Even despite the best interest duty there was a risk there, so we’re glad to see [the change],” Vamos said.
The superannuation industry will also be required to disclose both the dollar and percentage values of all new and existing commissions so that consumers can see the effect on their premiums.
The Government will also work to introduce uniform claw-back provisions to discourage ‘churn’ in the industry.
