Retirement
Deciphering the group insurance debate
Most superannuation funds include a number of insurance options designed to protect members financially should something happen to them, but this arrangement has recently become a contentious point among industry groups and government bodies.

Deciphering the group insurance debate
Most superannuation funds include a number of insurance options designed to protect members financially should something happen to them, but this arrangement has recently become a contentious point among industry groups and government bodies.

Under the current arrangements, most super funds typically offer life insurance, total and permanent disability (TPD) insurance, and income protection to their members, ASIC notes on their MoneySmart website.
ASIC explains that while individual members can choose to increase, decrease, or even cancel this insurance (known as group insurance), default super funds have a minimum level of insurance they must offer, and as with other kinds of insurance, individuals are required to pay premiums on these products.
Currently, the Productivity Commission (a government research and advisory body designed to assess the economic and social welfare of Australians) is reviewing the super system in a bid to assess competitiveness and efficiency.
As part of this review, the Commission is considering the appropriateness of current insurance arrangements within the super system, exploring the potential impact insurance premiums are having on retirement savings and whether policy changes could result in better outcomes for fund members and the government.
“The Commission is to assess the efficiency and competitiveness of Australia’s superannuation system and make recommendations to improve outcomes for members and system stability,” the Commission explained in a consultation paper.
The primary goal of this is to establish whether the current insurance arrangements offer value for money and don’t unnecessarily erode individuals’ retirement savings.
“The cost of insurance held through superannuation detracts from retirement balances and ultimately retirement incomes, however policy dictates that life and total and permanent disability insurance are bundled with superannuation on an opt-out basis in default products,” the Commission explained in a draft report from August 2016.
“Given this constraint, the Commission plans to assess whether trustees are offering the most appropriate insurance for their members, and whether the costs of insurance are minimised for the type and level of cover provided.”
In July of this year, Minister for Revenue and Financial Services Kelly O’Dwyer said the government hoped the Commission’s research will ultimately make insurance in superannuation more appropriate and cost effective, but also that members will be able to opt out of insurance more easily if they so choose.
“This comprehensive package will help deliver all Australians a strong and modern superannuation system that is solely focused on outcomes for all Australians who rely on these funds to secure their retirement,” Ms O’Dwyer said.
“This is why we tasked the Productivity Commission to undertake a review of the system last year. The government will consider if any further changes to improve the superannuation system are required in light of any recommendations made by the Productivity Commission.”
The Financial Services Council (or FSC, a lobby group representing wholesale and retail superannuation funds) said it supported the move to make opting out of insurance easier for fund members, but also highlighted the importance of insurance within super funds.
“Group life insurance in superannuation is an important piece of public policy and a valuable safety net that delivers benefits very efficiently and effectively for millions of Australians,” the group said.
“However, the FSC supports reforms that make it simpler for those people who don't wish to have insurance cover inside superannuation to opt out if that is their choice. Consumers do need to fully understand the ramifications of opting out – and once they understand that, we support giving them easier options to do so.”
Are you concerned that insurance premiums are eating away at your retirement savings or is the financial security offered by in-built insurance policies a welcome addition to the services offered by your fund? Email your thoughts to This email address is being protected from spambots. You need JavaScript enabled to view it.!

Superannuation
Why opt-in super proposal is a ‘secret tax’ on Aussie workers
A proposal to give workers the option to pick between a wage rise or a super contribution increase has been slammed by industry funds, branding it as “a secret tax” on workers. ...Read more

Superannuation
Early super access could be less than expected
Money accessed through the early release of super scheme looked to be coming in under the government’s revised expectations as the scheme drew to a close at the end of 2020. ...Read more

Superannuation
Proposed super reforms to rob millions of Australians
Australia’s largest union has rejected the government’s new super reforms on the basis it will leave members worse off long-term due to being “stapled” to a high-fee fund. ...Read more

Superannuation
ISA takes another shot at super reforms, accuses government of favouring big banks
Just a few days after hitting out at the government’s Your Future, Your Super scheme, ISA is at it again, signalling to the government that it may have a fight on its hands when it comes to this now...Read more

Superannuation
Royal commission reforms pass Parliament signaling more super oversight
The first bill implementing recommendations from Hayne’s banking royal commission has passed through the Parliament. ...Read more

Superannuation
Fears half of super system may be exempt from performance test
While the Your Future, Your Super measure has been a topic of debate for weeks over its ability to create possibly unintended consequences, new questions have emerged about the measure’s ability to ...Read more

Superannuation
AustralianSuper tops $200bn in assets, aims for mega fund title
AustalianSuper has become the country’s first fund to top $200 billion in assets despite the harsh economic conditions which saw Australia dive into its first recession in 30 years. ...Read more

Superannuation
Gender superannuation gap declines to 50%
Superannuation is becoming an increasingly important asset in households’ wealth portfolios, but a gap remains between males’ and females’ account balances, the recent HILDA survey found. ...Read more

Superannuation
Why opt-in super proposal is a ‘secret tax’ on Aussie workers
A proposal to give workers the option to pick between a wage rise or a super contribution increase has been slammed by industry funds, branding it as “a secret tax” on workers. ...Read more

Superannuation
Early super access could be less than expected
Money accessed through the early release of super scheme looked to be coming in under the government’s revised expectations as the scheme drew to a close at the end of 2020. ...Read more

Superannuation
Proposed super reforms to rob millions of Australians
Australia’s largest union has rejected the government’s new super reforms on the basis it will leave members worse off long-term due to being “stapled” to a high-fee fund. ...Read more

Superannuation
ISA takes another shot at super reforms, accuses government of favouring big banks
Just a few days after hitting out at the government’s Your Future, Your Super scheme, ISA is at it again, signalling to the government that it may have a fight on its hands when it comes to this now...Read more

Superannuation
Royal commission reforms pass Parliament signaling more super oversight
The first bill implementing recommendations from Hayne’s banking royal commission has passed through the Parliament. ...Read more

Superannuation
Fears half of super system may be exempt from performance test
While the Your Future, Your Super measure has been a topic of debate for weeks over its ability to create possibly unintended consequences, new questions have emerged about the measure’s ability to ...Read more

Superannuation
AustralianSuper tops $200bn in assets, aims for mega fund title
AustalianSuper has become the country’s first fund to top $200 billion in assets despite the harsh economic conditions which saw Australia dive into its first recession in 30 years. ...Read more

Superannuation
Gender superannuation gap declines to 50%
Superannuation is becoming an increasingly important asset in households’ wealth portfolios, but a gap remains between males’ and females’ account balances, the recent HILDA survey found. ...Read more