Industry super fund HESTA has announced a new age-based pricing model for its insurance premiums that will hit older workers in the hip pocket.
HESTA, the industry fund for health sector workers, is the fifth-largest super fund in Australia with 830,000 members and $40 billion in assets.
Under the changes to Hesta’s income protection insurance, due to come into effect in March next year, a 40-year-old member’s cover will rise from $84,000 to $85,000 as weekly premiums rise from $1.09 to $1.18.
Members aged 60 and over, who are a higher risk due to their age, will pay 21 cents a week more, $1.30 up from $1.09, for an unchanged $17,100 in cover.
The changes mean that younger workers will pay less for their insurance premiums, but they will also receive less in return. Members aged 15 to 34 will pay just 16 cents a week in premiums, down from $1.09, but will have their cover reduced from $85,000 to $25,000.
Independent research house Rice Warner analysed the impact of the age-based restructured cover and pricing. They found that under the new arrangements a typical HESTA member who started work at age 22 could pay about 10 per cent less over their working life in insurance premiums for default cover to age 67.
Those figures don’t take into account the effects on current super fund members who have paid the highest rate of insurance cover all their life, and who will be slapped with the higher premiums from March next year.
“These changes are designed to ensure HESTA members have the cover they need while retaining their ability to grow their super balances for a comfortable and happy retirement,” HESTA CEO Debby Blakey said.
“We believe we’ve reached the right balance between providing appropriate insurance cover and ensuring insurance fees do not erode account balances,” Ms Blakey said.
What do you think? Do you think it is fair that older workers who have spent most of their careers paying higher premiums are slugged more as they approach retirement?