The Consumer Action Law Centre and Financial Rights Legal Centre have reacted to the Treasury Law Amendment (Putting Members’ Interests First) Bill 2019 by stating those who are financially vulnerable should still be able to access insurance in their superannuation.
The groups said they supported the objective of preventing unnecessary insurance premiums from eroding people’s super account balances, but were worried about those with low income or low super balances.
It said it did not support the removal of default insurance on active superannuation accounts with balances under $6,000.
In a submission to the Senate Economics Legislation Committee, the two groups said: “While we acknowledge the significant impact of balance erosion on low-balance accounts, it does not follow that people do not need insurance simply because they have less than $6,000 in superannuation.
“A successful insurance claim can have a life-changing effect for families struck by injury, illness or death. The beneficial impact of topping up retirement income when a person’s working life is unexpectedly cut short is arguably much greater for a person with a low superannuation balance than to someone with a substantial balance.”
The changes would particularly affect those who had recently returned to work after a period of absence, those who were new to Australia and those with an employer who had not paid employer contributions, they said.
Two alternative recommendations were put forward by the groups; to keep default insurance in low-balance superannuation accounts or that low-balance account reforms were delayed until the impact of the Protecting Your Super Act reforms on account erosion was known.