Retirement
Ouch: Super insurance fees could surge 26 per cent
Touted as a way to protect against balance erosion, an opt-in approach to insurance in super could instead see insurance premiums rise 26 per cent, new modelling suggests.
Ouch: Super insurance fees could surge 26 per cent
Touted as a way to protect against balance erosion, an opt-in approach to insurance in super could instead see insurance premiums rise 26 per cent, new modelling suggests.
According to modelling by big four accounting firm KPMG, the shift to make insurance in super an opt-in question for those younger than 25, those with inactive accounts and those with balances of less than $6,000 could see other savers stung with a potential premium hike of 26 per cent.
KPMG said the proposal, outlined in the 2018-19 budget, would see a 50 per cent fall in the levels of group life insurance cover and a 42 per cent fall in insurance premiums collections. The firm said this would have an “adverse impact” on premiums, with the shortfall prompting a hike in premiums.
Noting that the outcome at retirement is subject to future changes, KPMG said there were two potential outcomes. The first, in which premiums aren’t increased, would see fee-led balance erosion fall from 6.2 per cent to 5.8 per cent.
However, if premiums were to increase by the anticipated 26 per cent, the average erosion would rise to 7.3 per cent.
“The most heavily impacted categories of erosion of benefits due to default insurance cover are females and low income earners,” KPMG warned.
“For example, considering an increase in insurance premiums of 26 per cent, we estimate the average erosion of account balances for females will increase from 7.6 per cent to 9.0 per cent and low income earners (<$18,200) to increase from 15.8 per cent to 17.6 per cent.”
The firm said the changes would have both intended and unintended “material impacts”, and would leave women and low income earners “worse off”.
RELATED ARTICLES
Superannuation
Payday Super bill introduces new challenges for SMBs, reveals Employment Hero CEO
The introduction of the Payday Super bill to the Australian Parliament has sparked a significant response from the business community, particularly among small and medium-sized businesses (SMBs)Read more
Superannuation
Rest urges Parliament to expedite payday super legislation
In a significant move towards enhancing retirement outcomes for Australian workers, Rest, one of the country's largest profit-to-member superannuation funds, has expressed strong support for the ...Read more
Superannuation
Recalibrated super performance test aims to enhance accountability and investment opportunities
In a move that signals a shift rather than a cessation, Australia's government has announced a targeted review of the superannuation performance test. This recalibration, prompted by the latest ...Read more
Superannuation
Super performance test faces a fork balancing member value productive investment and regulatory trust
APRA’s latest superannuation performance test results have reignited a high‑stakes debate: does the test optimise member value or unintentionally curb long‑term investment in housing, infrastructure ...Read more
Superannuation
Aware Super unveils innovative digital tool to boost retirees' financial confidence
Aware Super has unveiled a groundbreaking digital advice tool, Retirement Manager, designed to empower retirees by addressing their most pressing financial concerns. Developed in collaboration with ...Read more
Superannuation
APRA's super shake-up: Balancing accountability and innovation in the next round
Australia’s performance test has forced long-overdue transparency in super and accelerated consolidation. But as the regime broadens, its blunt edges are colliding with investment complexity, ESG ...Read more
Superannuation
APRA’s performance test is doing its job — but now it risks doing the wrong job well
Australia’s superannuation performance test has flushed out chronic underperformance and catalysed consolidation. But its latest results have reignited a bigger question: can a single, ...Read more
Superannuation
Rest invests in US-based REIT amid changes in debt financing markets
In a strategic move that underscores the evolving landscape of commercial finance, Rest, one of Australia's largest profit-to-member superannuation funds, has announced a significant investment into ...Read more
Superannuation
Payday Super bill introduces new challenges for SMBs, reveals Employment Hero CEO
The introduction of the Payday Super bill to the Australian Parliament has sparked a significant response from the business community, particularly among small and medium-sized businesses (SMBs)Read more
Superannuation
Rest urges Parliament to expedite payday super legislation
In a significant move towards enhancing retirement outcomes for Australian workers, Rest, one of the country's largest profit-to-member superannuation funds, has expressed strong support for the ...Read more
Superannuation
Recalibrated super performance test aims to enhance accountability and investment opportunities
In a move that signals a shift rather than a cessation, Australia's government has announced a targeted review of the superannuation performance test. This recalibration, prompted by the latest ...Read more
Superannuation
Super performance test faces a fork balancing member value productive investment and regulatory trust
APRA’s latest superannuation performance test results have reignited a high‑stakes debate: does the test optimise member value or unintentionally curb long‑term investment in housing, infrastructure ...Read more
Superannuation
Aware Super unveils innovative digital tool to boost retirees' financial confidence
Aware Super has unveiled a groundbreaking digital advice tool, Retirement Manager, designed to empower retirees by addressing their most pressing financial concerns. Developed in collaboration with ...Read more
Superannuation
APRA's super shake-up: Balancing accountability and innovation in the next round
Australia’s performance test has forced long-overdue transparency in super and accelerated consolidation. But as the regime broadens, its blunt edges are colliding with investment complexity, ESG ...Read more
Superannuation
APRA’s performance test is doing its job — but now it risks doing the wrong job well
Australia’s superannuation performance test has flushed out chronic underperformance and catalysed consolidation. But its latest results have reignited a bigger question: can a single, ...Read more
Superannuation
Rest invests in US-based REIT amid changes in debt financing markets
In a strategic move that underscores the evolving landscape of commercial finance, Rest, one of Australia's largest profit-to-member superannuation funds, has announced a significant investment into ...Read more
