You wouldn’t want to be a patient in a public health system that used diagnostic tools of the timeliness and quality used by some of the commentators in public policy debate about superannuation.
Prescriptions and excisions recommended by supposed expert public policy practitioners or some journalists are often based on rather dodgy interpretations of dated data.
If a similar approach was taken in the medical profession, then treatment plans would make use of x-rays taken two years ago of someone who may or may not be the patient in question. Operations undertaken would often involve attempting to take out an organ previously removed or treated.
A case in point relates to analysis by several commentators regarding the number of multiple and unnecessary superannuation accounts in the system and the associated administration fees and insurance premiums charged. The release each year of data on account numbers by the Australian Taxation Office generally stimulates such commentary.
Some analysts start with a very mistaken estimate of the number of accounts needed in the system. They basically assume that it is only the 10 million or so people in the paid labour force that need a superannuation account. This ignores those that have retired and those who have not yet reached preservation age but are not currently in employment. The actual number of people with superannuation is 16.1 million.
This figure gets compared to the APRA data on the number of accounts in the superannuation system.
There were around 28 million accounts in total in June 2018 with 14 million accounts with insurance cover at that date. However, both numbers are now well down on those levels due to the impact of the Protecting Your Super (PYS) and Putting Members’ Interests First (PMIF) legislation. This is generally ignored by a number of the critics of the superannuation system.
The number of accounts in the system fell by around 3 million in October 2019. A further fall in account numbers of around 2 million can be expected in the next year or so as additional accounts in Eligible Rollover Funds move first to the ATO and then to active accounts of individuals.
The number of accounts with insurance cover has also fallen substantially in recent months with ASFA analysis indicating that the PYS provisions have resulted in around 2.5 million fewer accounts with insurance cover. The PMIF legislation could initially lead to a further 1.6 million accounts no longer having insurance cover with this number growing to 2.3 million over time.
All these measures impact primarily on inactive and/or low balance accounts, thereby addressing some criticisms about account balances being unduly eroded by fees and insurance premiums.
ASIC has also engaged in analysis of their preview position regarding the consideration of TPD insurance claims Report 633 Holes in the safety net: A review of TPD insurance claims.
In the past there have clearly been problems with how insurance claims were assessed and processed. There also were issues in some cases with definitions and product design. However, much has changed since 2016-17, which is the period covered by most of the data in the ASIC report.
Since then there has been the introduction of the Insurance in Superannuation Code of Practice and the Life Insurance Code of Practice. There also have been changes in insurer practices (including changes to definitions of disability) following the hearings and report of the Financial Services Royal Commission.
Survey data compiled by the Financial Services Council for 2018 tell a very different story to the experience in 2016-17 which has been detailed by ASIC. Data to the end of 2018 shows 88 per cent of TPD claims were paid in the first instance, with an even higher figure of 91 per cent for mental health TPD claims. This includes claims against all definitions, including activities of daily living (ADLs).
Also, the PYS and PMIF measures have led to the cessation of insurance cover for many individuals who are not currently in the paid labour force. This means there will be even less reliance on activities of daily living in establishing TPD, down from the very low current rate for this definition being applied of around 3 per cent of claims.
The superannuation sector is not without its faults, even after the many recent policy changes. However, diagnosis and treatment plans should be based on where the system is now, rather than how it was a few years ago. Australia has a world class retirement income system and its strengths should be built upon rather being the subject of unfair and outdated criticisms.