The Senate Economic Legislation Committee’s recently-released majority report on the Protecting Your Super reforms ignores the collective view much of the industry on the removal of insurance cover for active superannuation accounts under $6,000, Berrill & Watson Lawyers has lamented.
Principal of the superannuation and insurance law firm, John Berrill, said the report disregarded the opinions of the consumer movement, the Australian Prudential Regulation Authority (APRA), the Productivity Commission and the insurance and super industries regarding the issue.
He warned “the end result will be a poverty trap and greater welfare dependence” should the cover be removed.
“Rarely do all of these groups speak with one voice. But one thing is clear, the measure to remove insurance cover for people with active account balances under $6,000 is not in the interests of super fund members,” Berrill said.
“Removing insurance cover for people with active accounts under $6,000 will mean two things. Firstly, higher insurance premiums for everyone else. Secondly, already vulnerable communities such as indigenous Australians, new migrants, casuals and mothers returning from maternity leave will often be left without valuable insurance cover for upwards of two years.”
Berrill cautioned that the report’s suggestion that those losing insurance cover would still have support from the disability support pension or workers compensation to rely on wasn’t true. He said that the former was “extremely hard to get” and the latter did not contribute anything to super.
Furthermore, Berrill said that by enforcing an implementation timeline for the policy of July, next year, the Committee risked higher costs and premiums being imposed on super members. He said that July 2020 was “not an unreasonable time frame”.
Berrill noted that Labor Senators filed a minority report voicing concern about both the removal of insurance for low-income accounts and the implementation timeframe. He said he remained “hopeful that Labor can work with the Government and cross-benches to ensure that appropriate amendments can be made”.
