The Cooper Review has recommended all\u00a0commissions should be banned\u00a0on risk products in superannuation.<\/p>\n
The proposed banning of risk commissions in super is one of sixteen recommendations made\u00a0in the Insurance in Superannuation<\/em> section of\u00a0the Super System Review Final Report, released on Monday this week.<\/p>\n The rationale developed by the Cooper Review Panel in recommending that risk commissions be banned in super is strongly influenced by the Panel’s broader agenda to maximise the value of a member’s superannuation accumulation during their working life.\u00a0 This agenda is reflected in the main reccommendations stemming from the Cooper Review, which focus on greater efficiencies and cost savings that will be brought about by the introduction of the MySuper<\/em> product and SuperStream<\/em> back office administration concepts.<\/p>\n The Panel argues that the cost to the member of commissions on risk products makes up a\u00a0meaningful proportion of the overall cost of the members’ insurance premium.\u00a0 This is part of a broader concern about insurance premiums eating into superannuation account growth, as stated in the Final Report:<\/p>\n ‘Currently, trustees must seek to strike the right balance in offering insurance to protect against the risks of being unable to contribute to an adequate standard of living and the impact of premiums paid on ultimate retirement benefits.’<\/em><\/p>\n Citing research data, the report compares\u00a0the relative costs to insurers of commissions and claims paid.\u00a0 The Panel says that while these figures relate to products both within and outside the superannuation system, ‘… it is clear that commissions represent a major expense for life insurers, and by implication for superannuation fund members.<\/p>\n The Panel says it received a number of submissions that supported banning risk super commissions, and that it agrees with these views<\/p>\n It adds that it\u00a0believes\u00a0‘… insurance commissions should be prohibited in respect of all superannuation products regardless of whether the insurance cover is a default cover or not,’ adding\u00a0it was also\u00a0concerned that allowing commission\u2010based payments for insurance would mean that financial planners could still be conflicted in giving their superannuation advice.’<\/p>\n But while the Cooper Review Panel cites the issue of conflict of interest, its main motivation in calling for risk commissions to be banned in super is almost entirely about maximising superannuation accumulation levels for an ageing working population.<\/p>\n The exact recommendation wording (Recommendation 5.12) made by the Panel is:<\/p>\n Up\u2010front and trailing commissions and similar payments should be prohibited in respect of any insurance offered to any superannuation entity, including to SMSFs, regardless of rules on commissions that might apply outside superannuation.<\/em><\/p>\n… it is clear that commissions represent a major expense for life insurers, and by implication for superannuation fund members<\/h6>\n
… allowing commission\u2010based payments for insurance would mean that financial planners could still be conflicted in giving their superannuation advice<\/h6>\n