Maurice Blackburn principal Kim Shaw said the introduction of intervening legislation had become necessary after the superannuation industry failed to introduce appropriate protections through a compulsory code of practice.
In light of this, reforms announced by the government in the budget were unsurprising, she said.
“The government has always been clear that if the broader industry squibbed its opportunity to develop a binding and non-voluntary code of practice then government would be left with little option but to look at a regulatory response to address issues facing the industry,” she said.
“Despite these warnings and countless concerns raised by stakeholders, the industry served up a code that had all the bite of a wet lettuce, leaving the federal government with little option but to take legislative steps to better support claimants.”
The new legislation looks to reserve a “critical default cover safety net” whilst also ensuring retirement balances are not unnecessarily eroded, she said.
“We have continued to support sensible measures to better tailor superannuation cover for young people that strike the right balance between providing the ability to opt-in to insurance cover if they wish to, whilst also ensuring those with multiple employers and super accounts don’t have their retirement balances eroded unnecessarily,” she commented.
“It will be up to superannuation funds to ensure that they communicate clearly with this cohort of members to ensure under-25s do opt-in should they have dependents and assets to protect to avoid any unintended consequences.”
The new measures — including opt-in provisions for accounts under $6,000 and the ceasing of cover after 13 months if no eligible contributions have been made — will help address “Australia’s critical under-insurance problem”, Ms Shaw said; a balance which the government must be sure to maintain.
“Measures to protect retirement balances are important, but so too is ensuring people are appropriately insured, and our current default system coupled with these reforms achieves the right balance,” she said.