Young Australians are still able to select superannuation funds with opt-in insurance, even though the Government failed to have this provision passed into law.
Last month the Senate passed the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018 after the Morrison Government negotiated a deal with the Greens and made amendments to Schedule 2 of the bill.
The amendment meant that a switch from opt-out (default) life cover to opt-in for members under 25 was not included in a package of super fund member protection provisions.
There was concern that it was a too broader change and members of some funds should have life cover, particularly those who have high risk occupations and dependants.
The Association of Superannuation Funds of Australia’s chief executive Martin Fahy says: “Many young people have dependants and financial commitments so in the instance of a tragic event occurring, particularly disablement early in life, having insurance in place is extremely valuable.”
Despite this, consumers under 25 are still able to take out superannuation with an opt-in insurance policy from some funds.
Nick Kirwan, senior policy manager at the Financial Services Council says: “The FSC does not believe there is anything in the proposed legislation which would prevent a fund from offering its members insurance on an opt-in basis if that is their preferred approach.”
Australia’s largest superannuation fund, AustralianSuper offers life insurance for members under 25 on an opt-in basis in order to prevent superannuation balances from eroding. Members still have the option to add insurance to their account and it will automatically be added when they turn 25.
StudentSuper offers a similar super fund for young Australians that do not want an insurance policy at all. It does not offer default insurance as it believes that insurance premiums can erode low super balances.
The Government is hoping to revive its opt-in provision for under 25s. It introduced more legislation to the House of Representatives for under 25s for the insurance in super measures as part of the Treasury Laws Amendment (Putting Members’ Interests First) Bill 2019 to restore the legislation to what is was before.
Treasurer Josh Frydenberg says: “It means the hard-earned retirement savings of millions of Australians will be protected from undue erosion through inappropriate insurance arrangements.”
The government estimates that around 10 per cent of fund members currently holding duplicate life cover in super are under 25 years of age.
This legislation has been tabled in the House of Representatives will very few sitting days until the proposed election. It is unlikely this will be voted on.