A year after super stapling came into effect under the Your Future, Your Super (YFYS) legislation, Cbus Super has called for the measures to be urgently addressed.
In its submission to the YFYS review, the industry super fund said that changes must be made so that workers in hazardous occupations and their families are not put at risk, left uninsured or disadvantaged by the unintended consequences of stapling.
Since November last year, employees have been ‘stapled’ to their existing super fund which follows them as they move from job to job unless they choose otherwise, with the intention of reducing fees and avoiding duplicate accounts.
Cbus CEO Justin Arter said that the fund’s workplace coordinators are increasingly seeing apprentices and young people on construction sites without any level of insurance cover.
“This is because many young people move into new jobs in construction but are stapled to the fund of their first job that likely won’t include insurance, or if it does is likely to include occupational exclusions,” he explained.
“This means despite the real life daily risks workers face in their new construction job, they are not insured for working at heights and with heavy machinery.”
The industry super fund has recommended that stapling without consideration for the performance of a fund or the appropriateness of the insurance offered should be abandoned.
Alternatively, Cbus has suggested that workers in hazardous occupations should be excluded from stapling and instead default into the fund named in their EBA or award.
“These laws leave the most at-risk cohort — young, new to the job and inexperienced — also the group least likely to think about insurance, or super for that matter, exposed,” Mr Arter said.
“Australian workers moving into hazardous sectors like building and construction deserve superannuation legislation that recognises their unique needs and protects them.”
Super stapling has faced a number of criticisms since it was introduced. Earlier this year, MLC Life Insurance found that 60 per cent of members had never heard of the measures, which it said left them at risk of having inadequate or no life insurance protection when changing jobs.
“Lots of people don’t know you can be stapled to a super fund that has failed the government’s performance test, and that could punch a huge hole in a person’s nest egg,” said ISA chief executive Bernie Dean.
“Switching out of a dud fund and into a good one is easy, but plenty of people don’t think about it until it’s too late, so it is up to the government to tighten consumer protections, so people are only stapled to the best funds that have passed the performance tests.”
When announcing the YFYS review in July, Minister for Financial Services Stephen Jones indicated that the review will not unwind the stapling measures.
Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.