New data has pointed to adverse impacts on insurance inside superannuation resulting from any decision by the Government to dump its timetable for increasing the superannuation guarantee (SG) to 12%.
The analysis, published by specialist research house Dexx&r, has pointed to a 10.5% decline in group lump sum new annual premiums to December 2029 which will be exacerbated if the legislated increase in the SG does not go ahead.
The Assistant Minister for Superannuation, Financial Services and Financial Technology, Senator Jane Hume has reinforced industry fears that the Government will reneg on the legislated SG rises claiming they would only serve to undermine wage increases.
The Dexx&r analysis, released today, forecast new annual premiums falling by 11% a year to $284 million at December 2029, down from $860 million in December, last year.
“The lower projected lower growth rates for both new and In-force group premiums reflect the impact of the COVID-19 super early release scheme, higher unemployment leading to a reduction of in the number active accounts eligible for automatic cover on an opt-out basis, and slower growth in account balances as the result of underemployment with little or no growth in wages and salaries over the next five years,” the analysis said.
“The current projections assume the legislated increase in the SG goes ahead. If it does not proceed the projected rate of growth in account balances and insurance premiums will be further reduced.”
The analysis said that low account balances would result in as many as 660,000 Australians losing default insurance cover, and that with the Federal Government forecasting that approximately 1.5 million Australians would withdraw in excess of $30 billion from their accounts under super early release provisions this would be problematic.
“Approximately 44% of the 1.5 million members aged between 25 and 65 have balances under $25,000,” it said. “Dexx&r expects 660,000 Australians will lose default insurance cover as their account balances will fall below the threshold for premiums to continue to be deducted.”
“Dexx&r has projected that $178 million in group lump sum premium and $48 million group income protection premium will be lost over the year to December 2020 as a result. It will be several years before many of these members again have a balance at a level where they are again eligible to receive default insurance cover,” it said.