Examples from DEXX&R on the implications of insurance in superannuation on a member’s final balance are misleading, according to a superannuation and insurance lawyer John Berrill.
Berrill said while the theory that as a result of the proposed concessional contribution cap members could cop a significant reduction in their finance balance if they held insurance benefits inside super, it only represented a tiny proportion of fund members.
“They are misleading because they don’t represent the level of TPD [total and permanent disability] level income protection cover that the vast majority of people have got,” Berrill said.
“Only a tiny tiny proportion of members who are aged 35 have got $2 million of death and TPD cover and a tiny percentage of members who are over 55 have $1 million in death and TPD cover and $12,000 a month in income protection.
“It’s only the high net worth white collar members who’d have anything like that sort of cover.”
Berrill said the average 35 year old member would have around $200,000 to $500,000 in death and TPD cover, while a 55 year old member on average would have an income protection cover of $3,000 to $6,000.
“If it’s designed to illustrate the effect on the average member account balance of insurance premiums then the examples don’t do that,” he said.
