Superannuation funds will have to ensure that members can “easily opt out” of insurance cover, under changes to the rules covering insurance in super.
The Australian Prudential Regulation Authority has released proposed revisions to its standard covering insurance in superannuation (SPS 250), and is calling for submissions by February next year.
Other proposed changes include a requirement that funds ensure they offer a level and type of cover that does not inappropriately erode the retirement income of beneficiaries. APRA says it is concerned that some funds have not given adequate consideration to this issue.
Another change is that any status attributed to a beneficiary in connection with the provision of insurance be fair and reasonable.
The Hayne Royal Commission heard reports of cases where super fund members were adversely impacted by being inappropriately attributed with a particular employment status under insurance arrangements.
Funds will need independent certification that superannuation arrangements are in the best interests of beneficiaries. Where an insurance arrangement is for a term of three years or more the certification must be provided to APRA on a biennial basis.
APRA says it expects the revised standard to be registered in July next year, with transitional arrangements in place until January 2021.
These proposed changes follow the passage of legislation in September requiring that insurance be provided on an opt-in basis for low balance super fund members and to new members under the age of 25.
The law complemented member protection measures passed in July, introducing a cap of 3 per cent on fees charged by super funds on accounts with balances below $6000. Exit fees on all super funds were banned.
All inactive accounts, with no activity for 16 months, will be transferred to the Australian Taxation Office. The ATO will expand its data matching process and reunite inactive accounts with the members’ active account, where possible. Insurance premiums will not be charged on these accounts.