Changes to boost savings
YOUNGER Australians will have more money in their retirement kitty after a drastic overhaul of the superannuation system that will see them better off later in life.
One of the nation’s largest superannuation funds, AustralianSuper, has revealed it will be scrapping automatic insurance for new members under the age of 25, which is tipped to deliver an additional $9000 come retirement.
Under the changes, new members will be required to “opt in” to insurance rather than automatically receiving it when they sign up but it will not affect existing members.
The Insurance in Superannuation Working Group – backed by both industry and retail funds – has identified balance erosion as a key concern.
AustralianSuper’s group executive of membership, Rose Kerlin, said for younger Australians 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 workplace they really need to start building that base for their retirement savings and what we were worried about was undue account erosion,’’ she 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 the age of 25 and each year only about 20 claims for total and permanently disability (TPD) 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.”
Ms Kerlin said compulsory insurance which covered death or TPD claims primarily benefited people who had dependants or financial commitments and only 10 per cent of the 20 claims made annually was used by partners and spouses or children.
The new changes will be implemented from November 2018.