Five million impacted by ‘opt-in’ insurance changes

Around five million superannuation fund members will be affected by the Government’s Budget changes to insurance within superannuation making it ‘opt in’ for those with low balances or aged under 25, according to an analysis provided by the Federal Treasury.

Answering questions on notice from the Senate Economics Legislation Committee, the Treasury said that based on 2015-16 data, around five million people had at least one account that would move from opt-out to opt-in insurance cover.

Further, it said that around three million of these people had only a single superannuation account and would therefore move to an opt-in insurance cover option for that account.

The Treasury analysis said that if the Government’s policy had been applied in 2015-16, it would have given those five million people the opportunity to save around an estimated $3 billion in insurance premiums by allowing them to choose to opt-in to cover, rather than paying for it by default.

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“Since individuals may have multiple accounts, they may move to opt-in cover for a combination of reasons - they may fall into more than one category (e.g. the same person can have an account that is inactive and an account with a balance less than $6,000),” it said. “As such, Treasury has not modelled the breakdown of people who have duplicate insurance by the specified categories.”

“Of the two million people with duplicate cover who are affected, the majority have another account with insurance cover that will continue,” the Treasury said. “Of the remaining affected members, some will be provided insurance on an opt-out basis as their account reaches $6,000 as a result of the ATO reunification process.”