Removal of default cover set to have a big impact, accounting firm warns.
Government changes to superannuation announced in Federal Budget 2018 will push up the cost of insurance for all others – and particularly women – by 26 per cent, according to accounting firm KPMG.
Super members with balances of less than $6000, members aged under 25 and those with inactive accounts will be the winners in the legislation that is currently working its way through parliament. In future, they will have to opt-in rather than opt-out as in the current system.
However, the changes will mean higher premiums for everyone else, KPMG noted.
In a report released yesterday, KPMG predicted that the higher premiums would have the biggest impact on women and low-income earners.
"We remain concerned that these changes may have significant unintended consequences to member retirement account balances," the report says.
Life insurers sold $12.1 billion worth of policies to Australian superannuation funds in the 12 months to the end of September 2017, The Australian reports. This was up from $11.5 billion a year earlier and accounted for half the life insurance industry’s gross sales.
Actuarial firm Rice Warner said pre-budget that a quarter of superannuation fund members were seeing their savings whittled away as trustees charged fees for unwanted life insurance on idle and forgotten super funds.
In some cases, insurance products sold in super had short-changed workers by as much as $600,000 by the time they reached retirement, The Australian report says.
KPMG says the percentage of the workforce with what is called ‘group life cover’, which includes death, total and permanent disablement and income protection, will drop by 50 per cent as a result of the changes.
Removing default cover for under-25s would lead to an increase in average age and therefore risk within the insurance pool, the report explains.
Super changes that will take effect from 1 July include:
- the ‘downsizer contribution’, which allows individuals aged 65 years and over to make non-concessional contributions of up to $300,000 (or $600,000 for couples) to their super from the proceeds of selling their main residences. This applies only if the home was owned for 10 years and is not sold before 1 July
- the catch-up, which allows individuals with a total superannuation balance of less than $500,000 to carry forward and contribute any unused concessional cap amounts for up to five years.
In other super news, the Australian Tax Office (ATO) has alerted retirees with self-managed super funds to beware of emails that appear to be from its office.
The email features the ATO’s letterhead and an address similar to that used in official ATO correspondence. The scammers ask people to complete an online ‘tax form’ through a link that contains malware.
The ATO says there are several telltale signs the email is fake, including that it doesn’t have a @ato.gov.au sender email address, even though the sender may look similar. Other signs include poor grammar and that the client is not specifically named.
This scam alert follows email scams from March to September 2017, and a phone scam alert in December last year.
Fighting the good fight is the Notifiable Data Breaches (NDB) scheme, which kicked off in late February and requires agencies, organisations and certain other entities to provide notice of a data breach to the Office of the Australian Information Commissioner (OAIC) and affected individuals.