The nation's largest superfund, AustralianSuper, will stop automatically signing people under 25 to life insurance in an effort to prevent their savings from eroding.
But the move – hailed as a first for the industry – won't come
into effect for more than a year, with the announcement blindsiding an
industry draft code-of-conduct slated for release later this week.
AustralianSuper, which is worth $120 billion, says a change in social trends has led to life insurance no
longer being relevant to some of its youngest members.
"People under 25 starting out in the workforce need to begin building a
base for their retirement savings," says Rose Kerlin, group executive of
"With people getting married or having kids later in life we need to adjust
our assumptions of what people need at various stages in their life."
Life insurance tends to benefit members that have dependants or financial
commitments that'll be affected if they were to become disabled or die.
AustralianSuper estimates only 10% of life insurance claims are paid to the
spouses and children of members who are under 25.
Ten years of life insurance costs $637. If a member who joined at 15 were to invest that money instead, by the time they retired it would've grown to $9000.
Those members under 25 who want life insurance still have the option of
adding it. Otherwise it'll be added to their fund automatically when they
The announcement comes at a precarious time for the superannuation
industry. A new draft code-of-conduct is expected to be released this week
by the Insurance in Superannuation Working Group, while a parliamentary
inquiry and an ASIC investigation are underway after a string of
claims-handling scandals were uncovered.