The insurance industry will need to work with the Government to develop a framework to handle auto-consolidation of superannuation accounts under the Stronger Super initiatives currently before the Parliament.
That is the bottom line of a roundtable conduced by Money Management’s sister publication, Super Review – an exercise which also pointed to the fact that the Australian Institute of Superannuation Trustees (AIST) believes the Government may ultimately move to allow the auto-consolidation of accounts containing more than $10,000.
Reacting to concerns from some insurers about how the auto-consolidation process would work, AIST specialist consultant David Haynes told the roundtable he did not think it was too late for the necessary discussions with the Government to take place.
He said insurers had not been significantly represented in the Stronger Super working group and this was something the Government needed to address.
"… Insurers weren’t represented significantly on that group, and I think there is a pressing need for the government to get together with the insurers to actually work out what the most appropriate way of consolidating larger accounts is in a way that doesn’t lead to distortion or misuse," he said.
Haynes had also suggested that the $10,000 limit that had been discussed with respect to auto-consolidation was not necessarily a fixed amount.
"…. The $10,000 limit that people are talking about, that too is not a fixed amount," he said.
"The position of AIST in fact is that the final position with auto-consolidation of those accounts should be uncapped, because the aim of this exercise should be actually to facilitate the consolidation of all accounts, not just the minority of smaller accounts.
"That is also consistent with the government position, which says that subsequent exercise will be the auto-consolidation of accounts with balances of at least $10,000," he said.
CommInsure’s Frank Crapis had earlier expressed concern about the manner in which auto-consolidation would work and impact insurance once it moved beyond accounts containing $1,000.
"There isn’t anything in the legislation that’s going to outline exactly how the auto-consolidation will occur from the insurance point of view," he said.
"The two or three key risks in there are, once it moves to $1,000 it’s generally fine, because I think that with the auto-consolidation of accounts less than $1,000 there won’t be too many accounts there anecdotally which will have the insurance impacts.
"It’s once it moves to $10,000 that I can see that it will have a major impact on those accounts where members have multiple accounts," Crapis said.
"The question really is around, so what will be the process? What will be the process that will be followed when those auto-consolidations of those accounts occur from an insurance point of view?
"If you look at the process today, you’ve got eight or nine insurers out there and they all offer this choice of where members can consolidate their insurance balances, but if you look at all the process it’s eight different processes and there’s no one uniform way of actually consolidating insurances today.
"Behind those eight insurers there are about six or seven different reinsurers who have different practices again, and will influence the way auto-consolidation occurs today."
