AIA Australia lambasts Government’s super proposals

The Federal Government’s “Protecting you Super Package” would result in limited financial gains for young Australians, while also leaving more than 1.4 million people under 25 without much needed financial protections, AIA Australia said.

According to the research commissioned by AIA Australia and Rice Warner, an opt-in insurance model for members under 25 would not address the unnecessary erosion of superannuation balances, with an individual’s retirement balance to increase by just $1,400 or 0.27 per cent over the course of their working life.

AIA said it considered this to be inadequate “when considering that life insurance claims and benefit payments for under 25s are growing each year, and that the proposed reforms would be offset by the potentially devastating physical and social impacts a member would experience in the event of a serious injury of illness”.

“This data raises legitimate questions as to the value of such reforms, where members will forgo valuable protections for a minimal financial gain in retirement. The cost savings are inadequate when considering the increased health and financial risks for under 25s,” AIA Australia and New Zealand CEO, Damien Mu said.

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“There are unintended consequences to these measures, including that premiums for remaining insured members will increase across their working life.”

However, the AIA welcomed measures that addressed duplicate accounts and said the government could achieve this through measures outlined by the Insurance in Superannuation Working Group Voluntary Code of Practice.

“By adopting new measures on inactive accounts, the government will achieve two-thirds of its targeted cost savings for members, while addressing the important issue of duplicate accounts. This is what the government should be focused on, removing cover only in instances where insurance is not required,” Mu said.