In an industry first, young members of AustralianSuper will be able to opt in to insurance rather than automatically receive it when they join the fund.
AustralianSuper, the country's biggest superannuation fund, says in a statement that members under 25 will no longer be given insurance automatically when they join in a bid to stop account erosion and make the system simpler and fairer for young members.
AustralianSuper’s Group Executive of Membership, Rose Kerlin, said the Fund made the move after extensive analysis of member experience and feedback on the impact of automatic default insurance premiums on the erosion of account balances of young people.
Ms Kerlin said: “People under 25 starting out in the workforce need to begin building a base for their retirement savings. Given that they are often on relatively low incomes, the Fund does not want to see undue account erosion because of insurance that may actually be of very limited value to them.
“But we also want to stress that members under 25 will still be able to choose to have insurance if they want it and cover will start automatically when they are 25.”
Ms Kerlin said insurance is primarily of benefit to people who have dependents or financial commitments that may be affected as a result of death or total and permanent disability.
“With people getting married or having kids later in life we need to adjust our assumptions of what people need at various stages in their life,” she said.
“AustralianSuper’s experience is that for claims paid for members under 25 only 10% are paid to financially dependent spouses or partners and children.”
The overall saving of this initiative, based on current prices, for a member joining the fund at age 15 is A$637 (US$514). This amount accumulated to retirement at 65 will increase the member’s retirement balance by nearly A$9,000, or nearly A$1,600 in today’s dollars. The changes means that default death and total and permanent disability insurance will, from November 2018, be in line with default income protection insurance which starts for AustralianSuper members at age 25.
The Fund provides insurance to 1.4 million of its 2.2 million members. AustralianSuper has more than 150,000 members under the age of 25 years. It manages more than A$120 billion of members’ retirement savings on behalf of more than 2.2 million members from across 220,000 businesses. One in 10 working Australians is a member of AustralianSuper.