How trailing commissions weighed on super

The removal of trailing commissions has been identified as a significant factor in the reduction of fees imposed by corporate master trusts.

An analysis prepared for the Productivity Commission has confirmed that while the introduction of MySuper products has acted to reduce fees in Australia, so too has the removal of trailing commissions.

The analysis was conducted by superannuation research house, Chant West for the Financial Services Council (FSC) and compared Australia's MySuper fee environment with that of Chilean pension funds regime but, in doing so, looked at where Australian fee reductions had been achieved.

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Pointing to where fee reductions had occurred, it said the major change had been for corporate master trusts "where total fees have reduced, partly due to lower investment fees but mainly due to the removal of trail commission from these products which used to average about 0.40 per cent per annum".

The Chant West analysis said that MySuper had been successful in reducing the fees charged by higher fee-paying products.

"Members of smaller employer plans wouldn't receive a discount and would be paying an average total fee 1.28 per cent per annum, down from 1.82 per cent before MySuper," it said.

The Chant West analysis found that fees under Australia's MySuper regime compared favourably with those which existed under the Chilean regime.

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