Second Reading SpeechMr SUKKAR (Deakin - Assistant Treasurer and Minister for Housing)
That this bill be now read a second time.
The Treasury Laws Amendment (Putting Members' Interests First) Bill 2019 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' retirement, 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 effect on 1 October.
The government recognises that insurance through superannuation, of course, has value for many Australians. While working on these elements there have been numerous examples provided of how people have benefited from having insurance in times of need.
However, what is not always mentioned are 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, I want to note. 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 can never claim.
Insurance premiums can reduce low-income earners' retirement balances by 10 per cent or more, compared to having no insurance and increasing with every additional set of policies that might be 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've directed otherwise.
The government recognises that many individuals already assess their insurance needs and make informed decisions themselves to hold accounts with a certain level of insurance.
To ensure that this measure doesn't 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.
The bill will undoubtedly 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 doesn't do it for all.
This is particularly the case for young members or members with low incomes, where the Productivity Commission found that insurance in super is poor value, does not meet their needs and means that premiums can result in an undue erosion of their hard-earned retirement savings.
Full details of the measure are contained in the explanatory memorandum.