‘Under-insurance’ risk in super sweep

Workers in high-risk jobs could find themselves without proper insurance under the federal government’s proposed plans.

Cbus chief executive Justin Arter. Workers in high-risk jobs could find themselves without proper insurance under the federal government’s proposed plans.

Workers in high-risk jobs such as construction could find themselves without proper insurance under the federal government’s proposed plans to have workers stay with their first super fund, Cbus chief executive Justin Arter has warned.

The chief executive of the $54bn construction industry superannuation fund has urged the government to exempt workers in high-risk jobs from the “stapling” provisions of its new superannuation legislation.

In an interview with The Australian, Mr Arter said the Cbus super fund, which has some 750,000 members, had organised total and permanent disability (TPD) insurance cover for its members to cover the risks of working in the construction industry.

The government’s proposed legislation, outlined in the October budget, would introduce a new provision that would see a worker’s super fund being the first one they signed up for, which could mean many construction industry workers would end up finding themselves with insufficient insurance in the event of an accident.

“The vast majority of our members work in a dangerous occupation,” Mr Arter said.

“About 80 per cent of them are not first time workers and would have a super fund from their earlier jobs.

“Our fund offers much better insurance if a worker is injured or killed on the job.”

He said while a worker could opt to move to a new fund when they changed jobs under the proposed legislation, if the stapling legislation went ahead they were likely to stay with their initial super fund.

He said another aspect of the legislation banning advertising by super funds could also reduce the ability of Cbus to pitch the benefits of its TPD insurance cover to new entrants to the building industry.

Cbus is arguing that the new law around super fund “stapling” should have an exemption for workers in hazardous industries so they can access the insurance benefits of their new funds.

He said Cbus wanted to see a situation where people joining high-risk occupations were “defaulted into” an industry-specific fund that had insurance that covered their risks.

“This would ensure they are covered by high-quality, industry-specific insurance from their first day on the job,” he said.

Cbus insurance paid out $298m in claims in 2019-20 for close to 3000 claims.

The industry super funds are also concerned about the ­proposed ban on advertising by super funds.

The proposed law says trustees can only make spending decisions that are in the best financial interests of their members, but leaves it open to regulators to decide on the details of what spending could be banned.

Mr Arter, who took charge of the superannuation major mid-last year, said the proposals disadvantaged industry super funds that were not part of broader corporate structures like retail funds.

He said this could see funds like Cbus unable to promote the benefits of their products through advertising while a retail fund could have their parent company do the advertising for them.

He said the fund was also concerned that the new laws would place the onus of proof on the superfund trustee to prove that an item of expenditure was in the best financial interests of members.

Cbus argues that the proposed comparisons of investment performance of funds and investment fees should also include the fees paid for administration of the fund.

“The government should look at the whole thing — both investment and administrative fees — in the comparisons,” he said.

“It is total fees which determine what members get on their investment returns, not just investment fees.”

Mr Arter said Cbus wanted to see the federal government separate the issues of weeding out lower-performing super funds from other proposals such as super fund “stapling”, which was designed to reduce the number of super funds and prevent unnecessary duplication.

“The government should prioritise removing underperforming funds from all sectors of the system first,” he said.