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).
