Unintended multiple superannuation accounts are collectively costing fund members $1.9 billion a year in excess insurance premiums, according to a background paper provided to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
The background paper, prepared ahead of the Royal Commission’s insurance-related hearings next month, has served to reinforce the reality of account erosion owed to insurance premiums.
It noted, as well, that the Superannuation Industry (Supervision) Act obligates superannuation funds to acquire or offer insurance of a particular kind or at a particular level “only if the cost of the insurance does not inappropriately erode the retirement incomes of beneficiaries”.
“The unintended multiple accounts for a member collectively cost the members who hold them $1.9 billion a year in excess insurance premiums,” it said.
“The Productivity Commission Report considered that the effects on retirement balances are worse for members on low incomes, especially those with intermittent labour force attachment who continue to have premiums deducted from their accounts while not contributing to their super.”
The background paper said the retirement balance erosion for these members could reach 14 per cent ($85 000), and well over a quarter for some disadvantaged members with duplicate insurance policies ($125 000).
Vanguard Super has reported strong returns across most of its investment options, attributed to a “low-cost, index-based approach”.
The fund has achieved double-digit returns amid market volatility, reinforcing the value of long-term investment strategies for its members.
Australian super funds notched a third consecutive year of strong returns, with the median balanced option delivering an estimated 10.1 per cent over the 2024-25 financial year, but an economist has warned that the rally may be harder to sustain as key risks gather pace.
AustralianSuper has reported a 9.52 per cent return for its Balanced super option for the 2024–25 financial year, as markets delivered another year of strong performance despite the complex investing environment.