Industry commentators have issued a warning to the Government about introducing legislation that would allow automatic consolidation of superannuation accounts.
TAL Managing Director, Jim Minto, and Andrew Weinmann, an Associate from Maurice Blackburn Lawyers, have both issued statements saying they are concerned about Australians losing valuable insurance cover if they consolidate their superannuation funds.
“If the numbers of superannuation accounts are automatically reduced in line with suggested new efficiency measures there is a risk some people will lose a large part of their existing protection,” Mr Minto said, adding: “The industry needs to ensure good policy is developed to help avoid adverse effects like the loss of this much needed coverage.”
The ‘automatic consolidation’ proposal forms part of the Government’s Stronger Super reform package. Specifically, the SuperStream working group is looking into measures to improve the ‘back office’ efficiency of the superannuation industry, including legislative changes to permit the use of tax file numbers as a primary search key, account consolidation and the linking of personal data.
However, even without the reforms Mr Weinmann argues that the current spate of advertising from financial services companies urging consumers to roll their super into one account may put Australians at risk.
“Financial services companies and super funds themselves spend millions of dollars urging Australians to roll over their accounts into one fund.
“While this may be the best way to manage fees across several super accounts I would seriously caution consumers against dropping their insurance cover or consolidating all their super funds without first thinking very carefully about their individual and family needs,” he said.
The views of Mr Minto and Mr Weinmann are in line with those of a number of industry associations.
In response to consultation papers issued by the Treasury on the Stronger Super reforms, the Financial Services Council and Financial Planning Association both recommended superannuation consolidation should only occur if the member provides their express consent.
Similarly, the Association of Superannuation Funds of Australia said it was concerned that the proposals did not appear to contemplate a requirement to provide appropriate disclosures on the impact on consolidation on benefits like insurance.
Despite some speculation that the Stronger Super Peak Consultative Group’s final report has been delayed because of concerns over the auto-consolidation provision, draft legislation on stage one of the SuperStream reforms is expected by the end of July.
