People holding life insurance within superannuation may need to reconsider that strategy following the changes to Concessional Contribution Caps in the recent Federal Budget with insurance premiums set to occupy a significant part of the cap, according to research house DEXX&R.<\/p>\n
DEXX&R\u00a0stated that the recent reduction in the Concessional Contribution Cap to $25,000 from 1 July 2017 with significant increases in new business for Death, TPD and Income Protection benefits held inside super may result in insurance premiums occupying more than a third of that cap.<\/p>\n
Using modelling based on ten life insurance offerings through retail and industry funds insurance premiums would occupy an average of 42% of the cap across the ten super funds based on a member aged 50 next birthday with $2 million Death and TPD and $12,000 per month Income Protection.<\/p>\n
Similar modelling for a super fund member turning 55 at their next birthday resulted in the member allocating an average of 71% of the $25,000 Concessional Contribution Cap to insurance premiums.<\/p>\n
DEXX&R\u00a0said the premium calculations were based on a professional white collar occupation and premiums payable for TPD and Income Protection by a member in a higher risk occupation would be considerably higher.<\/p>\n
However, even members with lower levels of cover inside super \u2013 such as $1 million of Death and TPD cover and $10,000 a month Income Protection Benefit coupled with Concessional Contributions of $18,000 per annum \u2013 would still allocate 37% of their Concessional Contributions each year to insurance premiums at age 50 and 60% at age 55.<\/p>\n
\u201cFinancial planners will need to consider this impact on a member\u2019s accumulation balance when considering whether high levels of insurance cover should be held inside super, and in particular the impact on retirement income for members with balances that are well below the $1.6 million that can be transferred on retirement to a complying income stream,\u201d DEXX&R said.<\/p>\n
Despite the possible impacts on Concessional Contribution Cap, DEXX&R also stated the levels of insurance premium inflows into superannuation for group risk business would remain unchanged but may change for individual premiums within super<\/p>\n
\u201cWe anticipate that the lower Concessional Cap will have minimal impact as premium inflows in the Group Risk market are largely based on default cover and only a small proportion of total premium is generated by higher levels of voluntary cover,\u201d DEXX&R said.<\/p>\n
However, the research group stated individual premiums within super may drop back to the levels of five years ago, despite an ongoing need for insurance cover, as advisers and clients consider whether superannuation is the best vehicle for insurance cover and that income protection premiums paid outside super are tax deductible and life insurance outside of superannuation was \u201c\u2026demonstrably superior in terms of definitions and benefits when compared to the equivalent inside super product\u201d.<\/p>\n","protected":false},"excerpt":{"rendered":"
People holding life insurance within superannuation may need to reconsider that strategy following the changes to Concessional Contribution Caps in the recent Federal Budget with insurance premiums set to occupy a significant part of the cap, according to research house DEXX&R.<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[4,5622],"tags":[],"class_list":{"0":"post-33305","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-products","7":"category-superannuation"},"_links":{"self":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/33305","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/comments?post=33305"}],"version-history":[{"count":0,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/posts\/33305\/revisions"}],"wp:attachment":[{"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/media?parent=33305"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/categories?post=33305"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/riskinfo.com.au\/news\/wp-json\/wp\/v2\/tags?post=33305"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}