The federal budget last night announced changes to superannuation group insurance arrangements.
The changes will mean super members under the age of 25 will be required to opt-in to group life insurance, rather than being placed into group products as a default.
The Financial Services Council came out in support of the change, but cautioned "it will be incumbent on superannuation fund trustees, particularly those in the default system, to engage and communicate more effectively with their under 25 year old members to ensure they understand the implications of the policy change".
“Superannuation fund trustees must carefully consider how they communicate this policy change to members to ensure those who need cover, particularly young people working in high risk occupations, get it," said FSC chief executive Sally Loane.
This is an opportunity for super funds to start a conversation with their younger members about all aspects of their superannuation savings. Greater engagement leads to better outcomes in retirement.”
In response to the budget announcement, ClearView issued a statement which also supported the change, describing it as “sensible public policy”.
ClearView managing director Simon Swanson said the new arrangements would “no longer force workers under the age of 25 to hold costly life insurance”, which he added they often didn’t need.
“Requiring members to opt-in for group insurance would result in a substantial improvement in understanding what cover they have and don’t have and stop the excessive erosion of their savings by fees and premiums for life insurance policies they can’t afford and often don’t want or need,” Mr Swanson said.
Despite this, Mr Swanson said ClearView will continue to push for opt-in arrangements for all Australians.
“While some, such as young people, end up with cover they don’t need, there are many other workers with significant needs who falsely believe they’re adequately covered through super when they are not,” Mr Swanson said.
“Australians should be encouraged to seek professional advice either via their super fund or a third party about the type and level of protection they need but the current opt-out model facilitates a set and forget approach that gives members a false sense of security.”
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