Young workers in dangerous jobs risk losing the life insurance in their superannuation as a result of legislation reintroduced to Parliament on Thursday.
Under the bill, the onus on the provision of insurance in super policies will be reversed for those under 25 and those with balances below $6000. That means under 25’s and low balance holders will have to opt in to get insurance in their super, rather than get coverage automatically unless they opt out as is the case now.
However, some super industry participants worry that young people in dangerous jobs and their families could suffer as a result. Young people are often very disengaged with super and are unlikely to react to communications from funds asking them to make a choice on insurance.
Youth is not a protection
“An unintended consequence of this bill will be the removal of default insurance for every young construction apprentice in the country,” said Cbus group executive Robbie Campo.
“Tragically, Cbus accepts a death claim for a member aged between 21 and 25 years old every one and half weeks,” she said.
“Our young members rely upon and claim against our insurance. Cbus accepts around 90 per cent of insurance claims made by members, which is above the industry average. We have paid out $1.1 billion of cover to members over the past 5 years,” Ms Campo said.
The Labor opposition superannuation spokesman Stephen Jones said while he supported parts of the bill it was “a blunt instrument” and that many young people in dangerous occupations “wouldn’t get coverage elsewhere”.
The change is aimed at ensuring balances are not eroded by unnecessary insurance costs. Young people rarely claim on insurance in super and low balances risk being eroded by insurance and other fees members don’t understand.
“We support changes to prevent super balances being unnecessarily eroded by insurance premiums but believe there needs to be safeguards for young workers working in dangerous jobs and industries, such as emergency services workers, construction workers and machinery drivers,” said Matt Linden, acting CEO of Industry Super Australia.
Labor will likely put forward amendments to the legislation to protect the interests of young workers in dangerous employment.
“I’m consulting with stakeholders next week,” Mr Jones said. “Last time the bill was up Labor put forward amendments that would have given APRA [the Australian Prudential Regulation Authority] the power to exclude dangerous professions.”
Rather than pass the legislation the government split the bill. In February it passed legislation restricting fees on funds below $6000 to three per cent.
It also allowed the Australian Taxation Office to hoover up funds of that size into special holding accounts if they had not received contributions for 16 months. Funds not receiving contributions for 16 months and so classes as inactive will also be turned to opt in for insurance rather than opt out.
APRA recently said that funds would be classed as inactive even if members have changed their investment options within the last 16 months. Receiving contributions would be the only sign of ‘activity’ in APRA’s eyes.
If the bill passes it is due to apply from October. “We are concerned the timelines proposed could negatively impact members by not giving funds sufficient time to communicate these changes to them,” Mr Linden said.
The New Daily is owned by Industry Super Holdings