Super saving for workers
EMPLOYEES will be able to easily opt out of life insurance policies automatically attached to super accounts which drain billions of dollars from retirement savings each year.
The Sunday Territorian understands the Turnbull Government will task banking and superannuation watchdog APRA with finding a simple way for workers to ditch the policies attached to the $500 million default super sector.
The reform is expected to form part of a broader government package designed to improve outcomes for fund members, which will be unveiled by Financial Services Minister Kelly O’Dwyer this week.
The Sunday Territorian understands that senior government ministers have campaigned for the change, arguing that the current framework is too complicated, especially for young workers who may have multiple employers.
According to Treasury, superannuation funds collected more than $8 billion in insurance premiums in 2015-16, which is equal to about 16 per cent of all employer superannuation contributions received during that period.
While the average premium for a single default life insurance policy is only $180 per year, millions of Australians with multiple accounts are seeing their super balances eroded and could be paying for insurance they will be ineligible to claim on.
It is estimated that almost a quarter of people, or 2.7 million, with insurance policies attached to their superannuation schemes have more than one account.
Almost 50,000 Australians have five or more super accounts, with duplicate insurance policies eating into their retirement incomes.
A recent analysis found that a blue-collar worker in this situation who earned on average $65,000 per year over their working life could lose up to 45 per cent, or $256,000, of their balance to insurance premiums and fees by the time they reached retirement age.