PM using 'weasel words' on 12pc super promise: Labor
Jul 22, 2019 Financial Review
Prime Minister Scott Morrison has declined to guarantee compulsory superannuation contributions will rise to 12 per cent of gross wages as legislated, after a handful of Liberal backbenchers ramped up their campaign to halt the scheduled rise.
Pressed by Labor to promise the rise from 9.5 per cent to 12 per cent would go ahead between 2021 and 2025, Mr Morrison appeared to give the government flexibility, saying: "There is no change to the government's policy."
Jim Chalmers has accused the Prime Minister of using weasel words over the superannuation guarantee.
"Scott Morrison refused twice today to guarantee the government won’t cave in to pressure from backbenchers and cut workers’ retirement incomes," he said.
The Productivity Commission recommended a review of retirement incomes before the scheduled rise to 12 per cent.
The government is keen on the idea, although it has not formally announced a review.
An even more immediate goal is to secure passage through the Senate of changes to default insurance in superannuation.
A bill being examined by the Senate economics legislation committee will prevent super funds automatically charging death and disability insurance premiums if a member is younger than 25 or has a balance of $6000 or less. Members who fall into these categories will need to "opt in" to coverage.
In a written submission to the Senate committee, AustralianSuper says the legislation has "gone too far" by proposing the removal of automatic insurance for "active" accounts with balances of less than $6000.
"The Productivity Commission recommended insurance not be provided for under-25s and inactive accounts, but it made no such recommendation in relation to active accounts under $6000," the submission says.
Construction industry fund Cbus says it has about 200,000 members who will be affected by the changes.
"Around a third of members affected would be unable to opt in to group cover in the future due to pre-existing conditions and issues identified in the underwriting process, leaving tens of thousands of workers in hazardous industries either without cover or only provided limited cover," the fund's submission says.
Labor is demanding the government rethink its refusal to allow the Senate committee to hold a public hearing.
'Insurance underclass'
Super Consumers Australia, which works with consumer advocacy group Choice, supports the bill because, for people under 25, "insurance in super is often a junk product".
Any carve-outs, such as for dangerous occupations, should be granted only if a fund could provide "robust evidence" of risks to members, the group said.
Damien Mu, the chief executive of insurance company AIA, said the bill would create an "insurance underclass" of workers who would find it hard to get coverage.
"This impacts millions of people, with the data in the AIA submission showing the most at-risk people being those living in rural and regional areas, young people with mental illnesses and workers in high-risk occupations," he said.
Actuarial firm Rice Warner agrees there should be a carve-out for active low-balance accounts.
"A significant portion will be under-25s," Rice Warner's submission says.
"These members are typically making lower contributions at this stage, due to lower salaries and intermittent working patterns, and due to their young age will have not yet had time to accumulate a material account balance."
The Australian Prudential Regulation Authority has urged the government to allow a 12-month implementation period because the October 1 deadline would "pose significant challenges for industry".