More than 40% of Australians have a secondary, redundant superannuation account costing up to $1.96 billion per year, reveals research conducted by CHOICE.
Consumers could retire with an extra $25,000 by consolidating their
superannuation accounts, and earn an extra $1600 a year in retirement
income, if only superannuation products were easier to understand and
manage, says Alan Kirkland, the chief executive of CHOICE.
Choice CEO Alan Kirkland at the Federal Parliament inquiry into life insurance.
"For many Australians dealing with their super falls into the too hard
basket. It's confusing, complicated and if you are unfortunate enough to be
paying the monthly fees on one of the 14 million duplicate accounts, it can
be very costly."
CHOICE made a number of recommendations today before a Federal
Parliamentary Inquiry in Sydney into the life insurance industry.
The recommendations focus on making superannuation simpler to understand,
easier to consolidate and enforceable by the industry regulator.
Paying two times the fees
Making it easier to consolidate superannuation would prevent Australians
from spending two times as much on fees and insurance, says Xavier
O'Halloran, policy and campaigns advisor at CHOICE.
"Most people are getting sold a new superannuation product every time they
change jobs and they end up with duplicate accounts. That means duplicate
fees," says O'Halloran."The end result is they're eroding their retirement savings."
"There should be a little tick box when you sign up to a new fund. It would
say: 'Would you like the fund to consolidate all of your other super
accounts?' Then the new super fund could go away and do that for you."
Costing young Australians
Life insurance and disability insurance is bundled into superannuation
packages. Younger Australians can find themselves paying more than they
should for these policies, says O'Halloran.
"You basically default into an insurance product at the moment as part of
your superannuation and they don't necessarily match your individual needs.
Particularly for young people we're concerned.
"In some cases, we've seen a default of death cover of up to $200,000 and
for a young person, who doesn't have a home loan, doesn't have any
dependents, a partner or children, that's simply far too much."
Among CHOICE's recommendations is the introduction of a key fact sheet; a
brief document provided by super funds simply outlining the details of a
life insurance policy.
But arguably the most significant recommendation involves the drafting of
an industry code that will be enforceable by the Australian Securities and
Investment Commission (ASIC).
"We would like industry to make sure the codes are up to a high enough
standard that ASIC will be willing to register it," says O'Halloran.
"If a fund or insurer breaches the consumer protections we need to make
sure someone's actually going to do something about it."