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Wednesday, 20 February 2019
Page: 1086

Mr ROBERT (FaddenAssistant Treasurer) (10:28): I move:

That this bill be now read a second time.

This bill amends the Superannuation Industry (Supervision) Act 1993 and the Superannuation (Unclaimed Money and Lost Members) Act 1999to improve the provision of default insurance in superannuation.

Given the significance of superannuation to Australians' retirements, the government wants to ensure that people's hard-earned savings are not unnecessarily eroded by inappropriate insurance arrangements.

This bill will address the provision of insurance through superannuation.

This bill requires that insurance be provided on an opt-in basis only for members with balances below $6,000 and any new members from 1 October 2019 who are under the age of 25.

The government has delayed the start date of these elements by three months from the announced commencement of the package to provide additional time for funds to take action and notify members prior to the changes taking affect from 1 October.

The government recognises that insurance through superannuation has value for many Australians. While working on these elements I have been provided with numerous examples of how people have benefitted from having insurance in times of need.

However, what is not always mentioned is the circumstances where people have had a significant proportion, and often their entire account balance eroded by insurance premiums.

The government does not propose to prevent anyone from being able to obtain insurance coverage within superannuation. We are simply trying to ensure that the current settings meet the needs of members without inappropriately eroding their retirement savings.

Default insurance, required under Labor's MySuper reforms, can result in members paying for cover that goes beyond their needs, or paying for multiple policies upon which they cannot claim.

Insurance premiums can reduce low-income earners' retirement balances by 10 per cent or more, compared to having no insurance, increasing with every additional set of policies held by an individual.

That is why, through this bill, the government will ensure that members who are at particular risk of account balance erosion will not have insurance provided as a default unless they have directed otherwise.

The government recognises that many individuals already assess their insurance needs and make informed decisions to hold accounts with a certain level of insurance.

To ensure this measure does not disadvantage engaged members, the legislation allows for a member to elect that they want to maintain their insurance and they will not be subject to the changes in this bill.

I believe that this bill will benefit young and low-balance members and is in the best interest of all Australians.

The independent Productivity Commission in its final report on superannuation found that, while insurance in super provides value for money for many members, it does not for all.

Particularly for young members or members with low incomes, the Productivity Commission found that insurance in super is poor value and does not meet their needs, meaning that premiums can result in undue erosion of retirement savings.

Full details of the measure are contained in the explanatory memorandum.

I commend this bill to the House.

Debate adjourned.