Required communication from trustees on the MySuper performance test does not take into consideration the full superannuation offering and could result in members missing out on appropriate insurance coverage, according to MLC.
Trustees of the 13 underperforming products of the Australian Prudential Regulation Authority (APRA) performance test were required to write to members by 27 September, 2021, advising them of their performance test outcome.
This communication required them to “suggest that you consider moving your money into a different superannuation product”.
Sean Williamson, MLC Life chief group insurance officer, said this suggestion could have a catastrophic impact for insurance members.
“What this letter does is encourage individuals to consider shifting to other funds if they go ahead and do that without consideration of all the elements, particularly insurance, then we believe some individuals will have catastrophic outcomes,” Williamson said.
Williamson said there should be greater awareness of the importance of making the right insurance decision and how members could access advice or education to do that, or to soften the wording of the letter.
“There should be the opportunity for funds to soften some of the wording so they can act in the best interest of members,” Williamson said.
“Members will need a high level of financial literacy or access to some sort of advice that’s from the fund or externally to help them navigate the decision they need to make.
“This is an example of where a lot of the decision making now is imposed on the individual and the consequences are much greater now.
“They are bearing more responsibility for the decisions they are making and the decisions this legislation forces them or encourages them to do.
“Superannuation members ultimately need a lot more support and education and if they don’t get that we will continue to see catastrophic outcomes for some of these members.”
Williamson said the fund that would impact them the most was likely to be Maritime Super, which had been expected to be one of the 13 underperformers.
“There’s really only five active insurers in the group insurance market so all of us are going to have one or two funds that are impacted,” Williamson said.
“We will be able to see the impact of people that have lost insurance in the fund over the coming months.”