Retirement
The super industry’s sticking point
Super funds are getting better at communicating but poor records in protecting low balance members are an ongoing source of friction, a new report has found.
The super industry’s sticking point
Super funds are getting better at communicating but poor records in protecting low balance members are an ongoing source of friction, a new report has found.
Research firm Investment Trends’ latest member engagement report found that funds are starting to capitalise on the power of social media, mobile apps and online chat to boost engagement, but are still falling down when it comes to member insurance.
“Super funds have enthusiastically promoted insurance to their members, but the lack of urgency among many funds to commit to the Voluntary Code of Practice is beginning to affect their social licence,” said Investment Trends technology analyst Ian Webster.
“Most funds are only gradually accepting their role in protecting low balance members and supporting the member claims process, but AustralianSuper is among the few that have taken early and decisive action.”
He continued, “Among the 44 largest super funds surveyed, roughly half have yet to provide explicit guidance and support for member insurance claims, while a quarter do not provide explicit information about member insurance claims on their website.”
The findings follow sweeping government measures to protect low balance members from what a major Productivity Commission report has described as “zombie” policies.
The Turnbull government in late June introduced to Parliament a bill preventing funds charging fees greater than 3 per cent on members with balances of less than $6,000. It also proposes insurance be provided on an opt-in basis for new members younger than 25, low balance members and those with inactive accounts.
According to the Productivity Commission’s draft report on the super system, a third of superannuation accounts are duplicates and lead to excess fees and “zombie” insurance policies. It put the financial cost of duplicate accounts at $2.6 billion.
Investment Trends described the conflict between the needs of super members, as a whole, and individual approaches to retirement and retirement outcomes as a “key challenge”.
According to modelling by accounting firm KPMG, the opt-in approach to insurance in super could see insurance premiums rise by 26 per cent as funds hike fees to address what it predicts will be substantially lower volumes of uptake.
Anticipating a 50 per cent fall in the levels of group life insurance cover, KPMG said the higher fees could end up eroding balances even more, and especially so for women and low income earners.
“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.”
RELATED ARTICLES
Superannuation
Australia's super performance test transforms investing: What's the next move?
APRA’s latest performance test has done more than name and shame lagging super options; it has rewired investment strategy, compressed fees and accelerated consolidation across the $3Read more
Superannuation
Australia's super test dilemma reform could boost long-term gains while keeping accountability sharp
APRA’s latest performance test results have reignited a structural debate: can Australia hold funds to account while still backing the nation’s long-horizon investment needs? With the government ...Read more
Superannuation
Super funds rethink strategy as APRA's performance test hits a fork in the road
The latest performance test results have reignited debate over Australia’s superannuation benchmarking regime and prompted a formal government review. Behind the headlines, boards are quietly rewiring ...Read more
Superannuation
Aware Super enhances digital tools for financial advisers, boosting efficiency and client engagement
Aware Super has unveiled a suite of new digital features designed to streamline the workflow for financial advisers and their clients. This significant upgrade includes direct data feeds to Xplan and ...Read more
Superannuation
Super funds flip the script as APRA's performance test sparks strategic overhaul
Australia’s performance test has lifted the floor on retirement outcomes—and divided the industry in the process. After early shockwaves, failure rates have fallen and fees have trended down, but ...Read more
Superannuation
Rewiring Australia’s super performance test: from compliance brake to capital engine
Can an accountability tool double as a nation-building lever? Canberra’s review of the superannuation performance test aims to preserve member protection while freeing funds to back long-dated assets ...Read more
Superannuation
Superannuation guarantee rate rises to 12 per cent as parental leave changes take effect
The superannuation guarantee rate has increased from 11.5 per cent to 12 per cent from Tuesday, with super contributions also being added to Commonwealth Parental Leave Pay for the first time. Read more
Superannuation
Rest's Sustainable Growth option achieves highest sustainability classification
Rest superannuation fund has achieved the highest sustainability classification for its Sustainable Growth investment option from the Responsible Investment Association Australasia. Read more
Superannuation
Australia's super performance test transforms investing: What's the next move?
APRA’s latest performance test has done more than name and shame lagging super options; it has rewired investment strategy, compressed fees and accelerated consolidation across the $3Read more
Superannuation
Australia's super test dilemma reform could boost long-term gains while keeping accountability sharp
APRA’s latest performance test results have reignited a structural debate: can Australia hold funds to account while still backing the nation’s long-horizon investment needs? With the government ...Read more
Superannuation
Super funds rethink strategy as APRA's performance test hits a fork in the road
The latest performance test results have reignited debate over Australia’s superannuation benchmarking regime and prompted a formal government review. Behind the headlines, boards are quietly rewiring ...Read more
Superannuation
Aware Super enhances digital tools for financial advisers, boosting efficiency and client engagement
Aware Super has unveiled a suite of new digital features designed to streamline the workflow for financial advisers and their clients. This significant upgrade includes direct data feeds to Xplan and ...Read more
Superannuation
Super funds flip the script as APRA's performance test sparks strategic overhaul
Australia’s performance test has lifted the floor on retirement outcomes—and divided the industry in the process. After early shockwaves, failure rates have fallen and fees have trended down, but ...Read more
Superannuation
Rewiring Australia’s super performance test: from compliance brake to capital engine
Can an accountability tool double as a nation-building lever? Canberra’s review of the superannuation performance test aims to preserve member protection while freeing funds to back long-dated assets ...Read more
Superannuation
Superannuation guarantee rate rises to 12 per cent as parental leave changes take effect
The superannuation guarantee rate has increased from 11.5 per cent to 12 per cent from Tuesday, with super contributions also being added to Commonwealth Parental Leave Pay for the first time. Read more
Superannuation
Rest's Sustainable Growth option achieves highest sustainability classification
Rest superannuation fund has achieved the highest sustainability classification for its Sustainable Growth investment option from the Responsible Investment Association Australasia. Read more
