Default insurance in superannuation: time we put members’ interests first
The Federal Government’s Putting Members’ Interests First Bill 2019 should be passed at the earliest opportunity. It will stop millions of Australians paying for inappropriate income protection, life, and total & permanent disability cover that they don’t need.
The premise of the Bill is simple: defaults should be set so that they are appropriate for most people. The Bill would prevent trustees from providing opt-out insurance to new members younger than 25 and members with balances below $6,000 unless a member has directed otherwise. These changes would not be the best for everyone, but they would provide the greatest benefit to the most workers at the least cost.
Super industry demands for amendments to similar provisions in the earlier Protecting Your Super Bill should be rejected. These carve-outs to have automatic insurance cover start at age 22 instead of 25, and to require workers in high-risk industries to continue to be defaulted into life and disability insurance through super, would hurt vastly more people than they would help. These amendments would address problems for the small number of young or low-income people who do need such insurance, but at the cost of forcing millions more people to pay for insurance the don’t need, draining workers’ retirement savings by more than $300 million a year.Tweet