Super bonus for young
YOUNGER Australians will have more money in their retirement kitty after a drastic overhaul of the superannuation system.
One of the nation’s largest funds, AustralianSuper, has revealed it will scrap automatic insurance for new members under 25, which is tipped to deliver them an additional $9000 come retirement time.
Under the changes new members will be required to “opt in” to insurance rather than automatically receiving it when they sign up. It will not impact existing members.
The insurance in superannuation working group — backed by industry and retail funds — has identified balance erosion as a key concern.
AustralianSuper’s group executive of membership, Rose Kerlin, said for younger Aus- tralians kickstarting their working careers, paying costs in unnecessary insurance in their younger years when they were unlikely to make a claim would hinder their balances come retirement.
“When people under 25 start out in the workforce they need to start building that base for their retirement savings and what we are were worried about was undue account erosion,’’ Ms Kerlin said.
“We looked at all of our claims and we looked at insurance that could be of limited value.”
The overall saving for a member joining the fund at age 15 is $637 and this amount will accumulate in compound interest to about $9000 by retirement at age 65.
AustralianSuper has 150,000 members under 25 and each year only about 20 claims for total and perma- nently disability are paid out.
The Association of Superannuation Funds of Australia’s chief policy officer, Glen McCrea, said while insurance through super was important, “fund members and funds need to consider whether what they are offering is suitable for their particular membership”.
“We note a variety of funds are adjusting insurance arrangements in order to get the right balance for their members between saving for retirement and having insurance cover during working years,’’ Mr McCrea said.
Ms Kerlin said compulsory insurance that covered death or TPD claims primarily benefited people with dependants or financial commitments.
The fund said it did not make revenue from insurance as its profits went to members.
The changes will start in November next year.