Adam Gee & Richard Wilkins investigate areas of the Productivity Commission’s review into the superannuation system that deal with default insurance coverage in superannuation.
The release of the Productivity Commission’s review into the superannuation system again saw the area of default insurance coverage in superannuation brought into the spotlight. Finding that paying for an unsuitable insurance policy can reduce a typical member’s balance by $85,000 or 14 percent by retirement, the final report essentially reiterated suggestions contained in the interim report of May 2018 and recommended that:
The recommendations were good news for Treasurer Josh Frydenberg, who noted that “the Commission endorses many of the Government’s superannuation reforms that are currently before Parliament”. Indeed, the Treasury Laws Amendment (Protecting Your Superannuation Package) Bill 2018, which has been before the Senate since June 2018 contains legislation, amongst others, to give effect to the above recommendations.
Why haven’t the proposals already been legislated?
Despite giving qualified support, Australian Labor Party (ALP) senators and others have a number of concerns, including:
The ALP also stated that they would reserve their position until after the outcomes of the Senate Economics Committee inquiry into the Bill were released.
The Committee has since recommended the Bill be passed by the Senate. Despite this, it now appears political gridlock will continue as we await the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry which may call for more overarching reform. With very few sitting days before the next election, meaningful changes may not be legislated for some time.
To continue reading this article, please log on to KPMG Tax Now.
Register for KPMG Tax Now if you have not already done so.