Unnecessary life and total and permanent disability (TPD) insurance within superannuation is a "far bigger destroyer of wealth" than paying fees on multiple funds, Good Super chief executive, Andrew MacLeod, believes.
Calling on the Assistant Treasurer, Josh Frydenberg, to implement a new system whereby Australians would not be required to opt-out of TPD insurance policies within super on second and third funds, MacLeod said young people were "vulnerable to being ripped-off" through the current opt-out system.
"While people talk about unnecessary fees from multiple superannuation accounts, unnecessary insurance is the far bigger destroyer of wealth," he said. "This needs to be fixed urgently."
"We have suggested that a Tax File Number be associated with every Life Insurance and TPD policy and that no duplicate policy may be issued without specific opt-in of multiple products. This is in contrast to the opt-out model that Australia now has.
"Many Australians have more than one superannuation account. In fact, according to the recent Murray Financial System Inquiry, there are nearly three superannuation accounts for every employee in Australia. Each might be deducting premiums for the same product costing that person thousands.
"Assuming a hypothetical 20-year-old white collar non-smoking male has three superannuation accounts and a default level of insurance bundled with each account his super, he may potentially erode up to $108,000 worth of retirement savings over a 45 year period just by paying these additional premiums and administration fees."