The current trend to fund life insurance premiums through superannuation is eating away Australians' retirement savings.
The current trend of funding life insurance premiums through superannuation is chipping away at Australians' retirement savings, according to a risk specialist.
"All the super funds today offer some form of insurance and you can be rest assured that 99 per cent of people don't salary sacrifice the cost of the insurance," Centric Wealth Advisers authorised representative Roy Agranat said.
"So what is actually happening is they don't have 9 per cent going into super, they actually have 7 or 8 per cent going into super, and an older person can be as low as 6 per cent.
"This is a sleeping giant. It is a problem because as you get older the cost increases and people are almost in denial because they say, 'I'm not paying the premium; it comes from my super fund'."
He said a majority of people did not realise they were chipping away at their retirement savings by funding their insurance premium through their superannuation account.
"It's significant and nobody seems to be saying it. As you get older it becomes more and more expensive and people think, 'oh, it's not coming out of my pocket, it's coming out of my super', but they don't realise how important their superannuation actually is," he said.
"So we always say to people at least salary sacrifice the cost of the insurance cover into the super fund so as not to actually chip away at the money you want to be invested."
Rice Warner Actuaries executive director Richard Weatherhead said there were some proprietary superannuation providers that continued the member's insurance cover even when their superannuation contributions ceased.
"So you have a situation where there's just a continual eating away of the superannuation benefit," Weatherhead said.
Salary continuance insurance played a large part in depleting Australians' retirement savings, he said.
"Salary continuance insurance can be quite expensive, so if we're talking about eating away at your retirement money then that is probably one of the bigger contributors to that," he said.
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