10 ways our financial system is about to improve
You will reap the benefits of the overhaul of Australia's financial system as the federal government responds to the Murray Financial System Inquiry.
Here are 10 improvements to the financial system:
1. No more steep credit card fees of up to $30 per transaction charged by airlines, restaurants, taxis and retailers.
2. Cheaper superannuation as fees fall and you will have more retirement savings.
3. Commissions cut on personal life insurance products to insurance agents.
4. Lower cost, simpler, more effective retirement products as a comprehensive income product for retirement (CIPR) is developed.
5. Smarter financial planners by raising their education, ethical and professional standards.
6. Bad products banned by ASIC as it gets new product intervention powers.
7. More crowd funding as small business gets a boost from new measures.
8. Easier to understand insurance.
9. Falling commissions charged by mortgage brokers.
10. Stronger banks by increased capital funds for absorbing loan losses.
Certainly banning excessive card surcharges is a long time coming and a great step towards fairer costs for using cards to make everyday purchases, says Michelle Hutchison from the rate comparison website, Finder.
"For too long we've seen companies like taxis, restaurants, retailers and airlines rip Australians off when paying with a credit card."
Hutchison says Australians are currently paying up to 10% or $30 per transaction for using their cards to pay for transactions with businesses such as airlines and taxis. "If merchants are forced to charge only the true cost for facilitating credit card transactions, Australians could save as much as 90% of the fee charged."
You can potentially save hundreds of dollars. For example if you use one $40 taxi per week in Brisbane, you could save over $185 in credit card surcharges over a year, says Hutchison.
Consumers need to take note of the charges which can seem very small, such as 3% of a $20 meal at a restaurant is 60 cents. "Ask what the merchant will charge before paying and keep a receipt. Once this legislation is in place, it will be up to consumers - as well as the regulators - to keep a close watch on surcharges," warns Hutchison.
Cuts to superannuation fees mean you will have more retirement savings.
While the Australian superannuation system ranks in the top three retirement systems in the world, there is one area where it has failed fund members, explains Vanguard's head of market strategy, Robin Bowerman. It has failed to capture the benefits of the scale of the $2 trillion in super and sharing those benefits with members via lower fees.
"Over a lifetime of work and ongoing contributions, small fee differences can have a major impact on the final account balance that a person has to fund their retirement. The challenge facing the industry is how to drive fees down faster," says Bowerman.
He says the intention to enshrine the objectives of the super system in legislation along with the acceptance of the need for the development of comprehensive income products are important developments.
"One of the key objectives of the super system is to deliver income for people in retirement yet this remains an area of the system where much more work needs to be done to help investors achieve the best possible outcomes in terms of product choices and ability to manage risk in the retirement years," says Bowerman.