Major superannuation consultancy, Deloitte is expecting around 600,000 of the 800,000 people who have signalled their intention to gain early access to their superannuation on hardship grounds to follow through but has repeated warnings about the implications for their insurance inside superannuation.
Deloitte’s head of superannuation, Russell Mason, said the Government’s move to provide early access to superannuation was well-intentioned but had significant unintended consequences.
He said the problem stemmed from the fact that more than 800,000 people had made enquiries with their superannuation fund to withdraw up to $10,000 from their account as a result of unemployment or reduced working hours, which the industry now expected to translate to 600,000 people following through.
“For many people, particularly new entrants to the workforce, casuals and part-timers, this could mean reducing their account balance to $0. And if they have no account balance, their death and disability insurance will cease, leaving them with no cover. This is significant,” Mason said.
“Should a member who has reduced their balance to $0 die or becomes disabled, they or their dependents will not receive a benefit, potentially causing an even worse financial situation for them,” he said.
Further, Mason said that even when that individual was re-employed or returned to normal hours as a result of new legislation, their insurance would not automatically be re-instated until their balance reaches $6,000 meaning that for casuals or part-timers they could remain uncovered for two to three years.
“This clearly has been an unintended consequence of the Government’s attempt to help those in financial distress. The problem is it may actually cause an even worse financial outcome,” Mason said. “We suspect that most people who withdraw their super will not have considered the impact on their insurance or even be aware of the implications.”