The federal opposition says it would not oppose a package of superannuation reforms that would mean younger funds members would have to opt-in for life insurance but has been pushing the government behind the scenes to take a “more nuanced approach”.
Shadow treasurer Chris Bowen told Investment Magazine last week he had contacted the government over his concerns that a “one-size-fits-all approach”, in which Australians aged under 25 and working in dangerous occupations no longer get automatic insurance could have “unintended consequences”.
“It might make sense if you’re a retail worker, you know perhaps, say, a young woman working in a pharmacy casually without a big balance and you’re unlikely to need life insurance any time soon,” Bowen said. “But if you’re a 24-year-old working 40 storeys up on scaffolding and you’ve got two kids, which is not unreasonable or an uncommon thing, you might want that life insurance and you might need that life insurance even if you don’t think about it.”
The “Protecting Your Super” bill is set to be debated in the Senate on Tuesday, and it is hoped its passing will prevent MySuper members’ account balances being whittled away due to unneeded life insurance.
The package of reforms, if enacted, would cap certain fees for low-balance accounts, ban exit fees on all accounts and require that insurance be provided on an opt-in basis only for members with balances below $6000 or accounts without a contribution for 13 months or longer, and for new members who are under 25.
It was the life-insurance reforms, in particular making insurance opt-in for under 25s, that troubled AustralianSuper, consumer group Choice, life-insurance giants AIA and TAL, and others. Some of the groups requested carve-outs from the bill, which was referred to the Senate Economics Legislation Committee for review at the end of June.
Today, Fairfax reported that Assistant Treasurer Stuart Robert would allow younger workers employed in risky industries to continue to have to opt out of their group insurance policies, as a way to appease the opposition and concerned cross-benchers. This was foreshadowed last week, when Robert said at a Financial Services Council event that there could be some “wiggle room” on coverage for those working in high-risk industries such as construction.
“There might be wiggle room [in higher-risk occupations],” he said. “I think there is an argument that is worth considering, particularly for people who go in very young in terms of apprenticeships.”
Robert said he needed “eight or nine” independent votes to ensure the bill would get through the Senate.
Bowen said he “understood what the government was trying to achieve” and was “sympathetic to that intent, but I think there are unintended consequences”.
“If a fund has been lazy and just has insurance in there, it’s not a particularly great deal for the members,” he said. Why should the members be forced to have it? Because the funders use their purchasing power to get a really good deal for members and premiums that are pretty low with a good product. Do we really want to be forcing people out of that?
“And you could say, ‘Oh, well, they can opt-in’ but who’s going to at age 24? We all know the problems with engagement in super.”
Last month, Robert said it was his “hope and indeed prayer” that the super package, which would require restructures of key group insurance arrangements, would be “finalised by the end of November”.
AIA Australia chief executive Damien Mu said he was concerned that the “Protecting Your Super” package was going to be “rushed through”. He raised particular concerns about under-25s having to opt-in for cover.
“The consequences are not being debated or discussed, no one has answered the questions about where these Australians will go,” Mu said. “I never believe it’s too late and even if the legislation gets passed, it doesn’t mean we can’t continue to fight it. I would really caution the government to please think about the alternative propositions.”
Three other super bills will also be discussed tomorrow, including expanding the prudential regulator’s powers with regards to penalising fund trustees.