Australians urged to check superannuation balances amid severe insurance premium increases
Australians have been warned to check their superannuation balances after severe increases in insurance premiums come into effect by the end of the year.
Funds have blamed government legislation designed to sweep away inequities in the super system for the increases in premiums, which can range from double-digit increases on death and disability cover to more than 60% for income protection insurance in some schemes.
But with millions of workers not regularly checking their super accounts for new fees and charges, consumer advocates have warned that people could be paying for expensive cover that they do not want or need.
Unisuper, for example, the fund for higher education, increased its combined death and total and permanent disablement (TPD) cover by up to 17.8% at the beginning of this month.
A 51-year-old man saving in the fund would see his weekly premium increase from $4.12 to $4.67 for $100,000 worth of death and TPD cover, Unisuper said, a rise of 13%. A woman in her late 30s with $181,000 of death and TPD cover would find herself paying $2.08 a week, an increase of 12%.
Australian Super premiums rose by around 20% in May for members who are insured for income protection, although that figure is 25% for younger members of the scheme. Members of Media Super are facing a hefty 62% increase for income protection insurance in December, taking monthly premiums to more than $100 for older members.
The Australian Financial Complaints Authority said the issue, which was affecting industry and retail super funds, had led to an increase in complaints from consumers who say they did not know they had insurance, did not want insurance and therefore have requested a refund of the premiums paid.
Xavier Halloran, a director at the consumer campaign organisation Choice, said the increases were a red flag for super members everywhere.
“These increases are a timely reminder for people to check if they have insurance in super, what they are paying, what benefit it offers and under what circumstances it will pay out,” he said.
“For example, people might be surprised to find that income protection generally provides cover for temporary disabilities and not as the name might suggest for any loss of income.”
Although many super members may be angered by seeing more money going into fees instead of their retirement savings, the increase in premiums is the result of an industry and government attempt to make the whole system fairer.
The royal commission into the financial services industry highlighted many anomalies such as how people with multiple dormant super accounts could be paying insurance on each account, even though they would only be able to claim on one policy.
The Putting Members’ Interests First legislation that came into effect in April 2020 applies to people under 25 and those with accounts with less than $6,000 and means they can opt out of paying insurance on all but one account. But the effect has been to greatly reduce the number of people paying super insurance, therefore forcing insurers to increase premiums paid by other members…
This article is from the Guardian, you can read the full article here: