insurance, primarily on an opt out basis and allow for income protection insurance to be provided on an opt out or opt in basis. Insurance premiums are a key driver of account balance erosion, and can reduce a low income retirement balance by 10 per cent or earner’s more (compared to no insurance) with the effect increasing for every set – of policies held. While there is a current regime for transferring lost superannuation balances to the Commissioner of Taxation (the Commissioner) to protect them from erosion, this regime requires longer periods of inactivity before amounts are transferred, assuming that the low balance account has not been entirely eroded by fees by this time. In addition, numerous exceptions permit trustees to not transfer balances below $6,000 to the Commissioner, allowing these balances to be subject to ongoing fee and premium erosion. Historically, there have been high levels of member disengagement with the superannuation sector. In addition, past and current restrictions on a to choose a fund have forced member’s ability individuals to hold multiple accounts. The combination of these factors has led to market outcomes that do not reflect the needs of the default and low balance cohorts of members. The changes in the exposure draft Bill will not replace existing account consolidation processes which will remain available to members. The changes supplement the current arrangements to streamline consolidation for disengaged members, ensuring that superannuation savings are better protected from inappropriate or excessive erosion by fees and insurance premiums. Reducing the number of low balance accounts will generate system-wide efficiencies by reducing administration costs for funds and better targeting default insurance coverage. The amendments in the exposure draft Bill are intended to protect superannuation savings from erosion by: members’ limiting fees on superannuation products so that these accounts can grow and are protected from disproportionately high fees; ensuring that arrangements for insurance in superannuation are appropriate so that members are not paying for insurance coverage that they do not know about or premiums that inappropriately erode their retirement savings; and strengthening the in reuniting small, inactive ATO’s role balances to reduce the costs to members and consolidate the accounts of members that have accrued multiple superannuation accounts.
insurance, primarily on an opt out basis and allow for income protection insurance to be provided on an opt out or opt in basis. Insurance premiums are a key driver of account balance erosion, and can reduce a low income earner’s retirement balance by 10 per cent or more (compared to no insurance) – with the effect increasing for every set of policies held. While there is a current regime for transferring lost superannuation balances to the Commissioner of Taxation (the Commissioner) to protect them from erosion, this regime requires longer periods of inactivity before amounts are transferred, assuming that the low balance account has not been entirely eroded by fees by this time. In addition, numerous exceptions permit trustees to not transfer balances below $6,000 to the Commissioner, allowing these balances to be subject to ongoing fee and premium erosion. Historically, there have been high levels of member disengagement with the superannuation sector. In addition, past and current restrictions on a member’s ability to choose a fund have forced individuals to hold multiple accounts. The combination of these factors has led to market outcomes that do not reflect the needs of the default and low balance cohorts of members. The changes in the exposure draft Bill will not replace existing account consolidation processes which will remain available to members. The changes supplement the current arrangements to streamline consolidation for disengaged members, ensuring that superannuation savings are better protected from inappropriate or excessive erosion by fees and insurance premiums. Reducing the number of low balance accounts will generate system-wide efficiencies by reducing administration costs for funds and better targeting default insurance coverage. The amendments in the exposure draft Bill are intended to protect members’ superannuation savings from erosion by: limiting fees on superannuation products so that these accounts can grow and are protected from disproportionately high fees; ensuring that arrangements for insurance in superannuation are appropriate so that members are not paying for insurance coverage that they do not know about or premiums that inappropriately erode their retirement savings; and strengthening the ATO’s role in reuniting small, inactive balances to reduce the costs to members and consolidate the accounts of members that have accrued multiple superannuation accounts.
01_T286292_Explanatory_Memorandum.docx