Choice Sparks An Insurance Debate
The Age
Tuesday March 8, 2005
THE superannuation industry has stepped up its campaign to force the Federal Government to ensure employers deposit employees' superannuation in accounts that offer life insurance.
Under draft regulations for the new superannuation choice scheme, employers can nominate any fund - including a basic Retirement Savings Account - as their "default" fund if an employee does not nominate their own fund. However, unlike other funds, RSAs are not required to provide basic life insurance cover."Minimum death cover is an essential protection and should be regarded as a key criteria for any default scheme," the Association of Superannuation Funds of Australia wrote in a letter to the minister for superannuation, Mal Brough, yesterday."It is a fundamental protection for individuals who do not make a choice," ASFA chief executive Philippa Smith said in the letter. "For low-wage people, the insurance component may be more valuable than the savings."The need for a minimum death cover for default funds had been debated within the industry for several years and was one of the key issues agreed to between the Government and the Democrats in the Senate last year that allowed the passage of the legislation that comes into effect on July 1.Ms Smith said employees had the right to choose an RSA or fund without insurance, but it should not be used as a default fund as the likelihood would be that the member would be unaware of the loss of life insurance. Insurance premiums range from 70 ? to $1 and buy about $50,000.RSAs are superannuation products offered by banks, building societies, credit unions and life insurance companies. Unlike regular super funds they are not managed as a trust on behalf of beneficiaries. In the September quarter, RSAs held $3.9 billion in retirement savings while super funds held $649.8 billion.CPA Australia's superannuation policy adviser, Michael Davison, said RSAs were receiving "special treatment" to the detriment of members.He said RSAs also generally returned less than regular super accounts, so members were "behind the eight ball already".
© 2005 The Age