Superannuation funds should not be responsible for the provision of insurance cover for members, Prime Super believes.
The fund’s submission to the Senate Standing Committee on Economics on the Your Future, Your Super bill said while the legislation did not address insurance, super contributions were made and invested for the long-term and paid at retirement as an income stream or a rollover benefit and insurance coverage was fundamentally different.
“It takes into account different risks associated with individuals, such as their occupation. Those funds with a high number of members from blue collar industries will have a higher cost for the insurance offered. The risk is not associated with superannuation, it is an insurance risk,” it said.
“We are of the view that a superannuation fund should not be responsible for the provision of insurance cover for members. Superannuation funds currently provide a minimum level of insurance cover for the majority of working-aged Australians.
“If this level of insurance cover is to be maintained, then a broad-based insurance scheme should be established that is separate to superannuation.”
Prime said this would provide a better solution through a large pool of diversified members where member risks could be balanced through a large pool.
It noted that financial outcomes for members in super would improve as the number of deductions form accounts would reduce.