As someone who has been in the industry for more than forty years, I experienced first-hand the birth of industry super funds and the positioning of personal insurance within them.
Having super funds in the awards system means restricted choice for you as a consumer.
Superannuation and insurance should be for the benefit of the individual.
One ideal solution, as mentioned in the ABC article below, is a free-market system.
‘A free market is a market system in which the prices for goods and services are set freely by consent between sellers and consumers, in which the laws and forces of supply and demand are free from any intervention by a government, price-setting monopoly, or other authority.” (https://www.google.com.au/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=what+is+free-market+system)
‘The findings of the long-awaited Financial System Inquiry’s Murray report calls for a major shake-up of superannuation to improve outcomes for consumers.
As stated in Superannuation changes could boost retirement incomes by 40pc, Financial System Inquiry finds, Mr Murray, a former CEO of the Commonwealth Bank, said he wanted legislation to clearly state the purpose of super and to remove it from the industrial relations system to stop it from being used as a political football.
What the report calls for:
- The big four banks should hold more cash to protect against future financial sector shocks
- A minimum percentage should be applied to the amount banks set aside to cover losses on home loans, to level the playing field for large and small lenders
- Super funds should be banned from borrowing because of the risk to the taxpayer if the fund collapses
- Super fund fees should be reduced
- Risks and fees should be better communicated to customers of financial institutions
Mr Murray recommended that MySuper should be replaced with a more competitive system unless it cut its fees dramatically, and said he wanted funds to offer retirement income products.
“We believe that these two initiatives have the potential to increase retirement incomes by 25 to 40 per cent,” he said.
In this, I agree with Mr Murray’s recommendations.
2. The use of annuities as the default option for the withdrawal of retirement benefits.
‘An annuity is a fixed sum of money paid to someone each year, typically for the rest of their life. It’s a form of insurance or investment entitling the investor to a series of annual sums.’ (https://www.google.com.au/webhp?sourceid=chrome-instant&ion=1&espv=2&ie=UTF-8#q=what+is+annuities+mean)
As Mr Murray said in the article , greater use of annuities may help make retirees’ super savings go further, and reduce the need for them to draw on the age pension.
While further restrictions may seem abitrary, this provides a potential solution to the forecast pension shortfall.
3. Insurance in Super; how does it work?
If your insurance policy sits within your superannuation fund it has implications on your claims process.
Any insurance within super must comply with the trust deed as well as the policy conditions and legislation.
Essentially, the process of a claim is more complex and potentially restrictive.
Take the time to speak to an adviser to ensure you understand your super and insurance and are optimally positioned to insure your lifestyle.