Is Govt undermining legitimate advice?
The Federal Government could be undermining a common strategy advised by financial planners if it were to proceed with the automatic consolidation of superannuation accounts, thereby closing out insurance options, according to the Financial Planning Association (FPA).
The FPA has used a submission to the Treasury responding to the exposure draft of the Government’s Treasury Laws Amendment (Protecting Superannuation) Bill 2018 to warn against the legislation’s “auto-consolidation” move.
“…the FPA expresses concern for auto-consolidation of accounts that meet the new criteria,” the submission said. “It is a common strategy for engaged super members or those with a financial planner to maintain default cover with no exclusions in an existing super account to fund premiums, therefore maintaining small balance superannuation accounts.”
The submission warned that by auto-consolidating low balance superannuation accounts to the Australian Taxation Office (ATO) commissioner, “some Australians with financial plans in place to address insurance objectives will have their strategy negated”.
“Therefore, the FPA does not support auto-consolidation of ‘lost member’ accounts where insurance is a feature of the accounts, as it will add to the incidence of under-insurance,” the FPA submission said.
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