As super ‘stapling’ begins, occupational exclusions must end
Super Consumers Australia welcomes the introduction of super ‘stapling’ which will boost the average person’s retirement savings by $50,000. But it is calling on Parliament to ban occupational exclusions from default life insurance in super, so that all Australians can get access to the insurance safety net. The call comes as the Government reviews the appropriateness of occupational exclusions in default insurance in MySuper products.
“Stopping the scourge of costly duplicate accounts will ultimately lead to bigger retirement savings for people, but without action from Parliament there is a risk some people will lose access to affordable default insurance cover in their super,” says Xavier O’Halloran, Director, Super Consumers Australia.
“At the moment some funds are excluding people from safety net default cover if they work in certain occupations like as a bartender or labourer, putting them and their families at risk,” says O’Halloran.
“The greatest benefit of default insurance is its ability to share risk among a large group of people, so that everyone has access to affordable cover. A very small number of funds have undermined the value of their cover by carving out certain occupations. This creates gaps and weakens the safety net. It’s not in keeping with the needs of people in a modern workforce, who change jobs and industries throughout their careers, but still expect to have a base level of protection.”
Super Consumers research found that excluding certain occupations doesn’t necessarily make cover cheap. One large fund with insurance exclusions charged more than double compared to the average premiums charged by other large funds without exclusions.
“It is clear from what is on offer in the market that the majority of funds have been able to cover people without having to charge exorbitant premiums. The simplest and fairest solution is to provide all default members with a safety net regardless of their occupation,” says O’Halloran.
The Financial Services Council (FSC) has announced it will ensure people continue to be covered if they move jobs, but stops short of protecting new default members to a fund.
“The FSC plan makes progress, but it does nothing to protect the next generation of young workers who are defaulted into a fund that excludes their occupation.”