The minimum age for automatic cover for insurance inside superannuation should be lowered to 21, rather than age 25 as being proposed by the Government in its Protecting your Super legislative package, according to the Association of Superannuation Funds of Australia (ASFA).
In a submission filed with the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the ASFA has warned that the Government’s approach will act to reduce existing coverage for MySuper members and notes that it has argued for the proposals to be amended in various ways to achieve a better balance between providing insurance benefits and minimising the impacts this has on retirement savings.
ASFA said that, in particular, it had recommended changing the minimum age that automatic cover could be provided to new members to 21 and allowing new members over any prescribed minimum age to be provided with automatic cover immediately upon joining a fund without having to accrue a $6,000 balance.
As well, the ASFA submission said it had also urged the removal of the obligation on funds to cease death, terminal illness and TPD insurance for inactive accounts when the balance is over $6,000 and introduce further exemptions to allow funds to provide and continue to provide insurance on an opt-out basis to members in high-risk occupations.
“ASFA supports making definitions within insurance as standard as possible with the qualification that in doing so innovation and tailoring of insurance for the needs of particular members are not unduly affected,” the submission said.
“We are also concerned that existing benefits are not curtailed or reduced. To this end we will participate in an industry-led review of standard definitions which is due to commence early in the new year.”