tal research paper - life insurance auto-consolidation final

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Life insurance & auto-consolidation – Risk versus return An examination of impacts and options

Gavin Lai, Senior Product Manager, TAL Katie Wilson, Group Life Marketing and Communications Manager, TAL

9 March 2012 Life Insurance and auto-consolidation – An examination of impacts and options - TAL of 23

Table of Contents 1. Executive summary.............................................................................................................. 3 2. Auto-consolidation – Background and outcomes ............................................................ 4

2.1. Background .................................................................................................................. 4 2.2. Proposed auto-consolidation process .......................................................................... 5 2.3. Research aims and limitations ..................................................................................... 6 2.4. Projected account rationalisation outcome – $1,000 threshold ................................... 6 2.5. Projected account rationalisation outcome – $10,000 threshold ................................. 7 2.6. Projected insurance exposure – $1,000 threshold ...................................................... 8 2.7. Projected insurance exposure – $10,000 threshold .................................................... 9 2.8. Summary of projected insurance exposure ................................................................. 9 2.9. Sample examination of cover levels .......................................................................... 10 2.10. Lack of guidance on insurance where consolidation occurs ..................................... 10

3. Insurance impacts and road test of 4 possible models ................................................. 11 3.1. Insurance impacts ...................................................................................................... 11 3.2. Four possible automatic consolidation models .......................................................... 13 3.3. Summary and comparison of outcomes under all models ......................................... 17 3.4. Assessment of impacts of each model ...................................................................... 18 3.5. Level of impact arising from each model ................................................................... 19

4. Conclusion .......................................................................................................................... 20 4.1. We all want to throw out the bathwater, but what about the baby? ........................... 20

5. Appendices ......................................................................................................................... 21 5.1. Appendix 1 – Account projections for the top 10 funds in each sector ...................... 21 5.2. Appendix 2 – Insurance projections for the top 10 funds in each sector ................... 22 5.3. Appendix 3 – Insurance projections f for each auto-consolidation model ................. 23


On 21 September 2011, the Government released their proposals on key design aspects of the Stronger Super reforms. These included plans for the automatic consolidation of lost and inactive superannuation accounts. In this paper we examine the government’s proposed auto-consolidation process as well as three alternative models that could apply to the insurance cover attached to inactive accounts. We also provide comment on the implications for members, government and the industry for each of these options.

1. Executive summary The combination of 33 million superannuation accounts with a workforce of just 11.3 million employees clearly shows that Australia has many more super accounts than actually required.

As part of the Stronger Super reforms, the government has indicated this oversupply is unnecessary, and potentially detrimental to account holders, because it creates unjustifiable costs in terms of fees and charges. However, this oversupply has also resulted in undeniable benefits in the form of wholesale, automatic insurance coverage for super fund members.

We know that the government is seeking to address this oversupply problem by facilitating a reduction in the number of unnecessary and lost superannuation accounts by approximately two thirds. One of the actions to reach this objective is the automatic consolidation of lost and inactive accounts (two years without contributions or rollover) with a balance of less than $1,000 and accounts in eligible rollover funds into a member’s current active account1. In the latter half of 2014 the threshold for auto-consolidation of lost and inactive accounts may be increased to at least $10,000.

Given that we’ve also seen the government recognise life insurance as a key element within superannuation through the MySuper reforms, the government and the industry should be alert to any potential risks or unintended consequences of auto-consolidation to the levels of life insurance cover.

We have identified that 31% of the 11.8 million inactive accounts with a balance less than $1,000 are likely to have insurance – so any automatic consolidation rule has the potential to affect 3.6 million currently insured members. We now need a Government position on how insurance should be dealt with where it is held in a duplicate account.

In addition to analysing the potential impacts of the government’s proposed approach, we have developed and analysed three alternative automatic consolidation approaches to the handling of insurance. Our projections show that while account reduction correlates strongly with insurance loss, it is also possible to minimise insurance loss without significantly impacting account reduction.

According to our projections, which are based primarily on APRA fund data2, secondary research sources such as Rice Warner and SuperRatings, and our own estimates, the maximum expected reduction percentage would be 35%. If insured accounts were excluded from this process – a reduction percentage of 23% would still be achieved – whilst mitigating the loss of insurance cover to members and their beneficiaries and reducing the administrative complexity of addressing insurance within the process of consolidation.

We note that our projections incorporate a substantial degree of estimation, given there is in fact very little relevant and concrete data available for these types of projections. Therefore it is imperative that more information is obtained to enable us to better understand the potential issues.

1 Stronger Super Information Pack 21 September 2011, page 12 2 This paper uses data from the APRA Annual Superannuation Bulletin Jun 2010. We note that this data has recently been updated to June 2011 (on 29 February 2012)


2. Auto-consolidation – Background and outcomes Logical consequences are the scarecrows of fools and the beacons of wise men. Thomas Huxley 2.1. Background The elimination of multiple superannuation accounts is a key element of the Stronger Super reforms aimed at encouraging “greater efficiency and lower fees”.3 The Government has noted that there are approximately 33 million superannuation accounts in Australia, but only approximately 11.3 million employed persons – as shown in

Table 1 below.

Table 1. Number of super accounts vs. number of workers

This marked oversupply works out to around 2.8 superannuation accounts per working Australian. The Government’s aim is to encourage rationalisation of these accounts by way of a “steady reduction in the number of unnecessary and lost superannuation accounts,”4 to a number that is closer to the number of actual working Australians.

This reduction would be achieved through a number of approaches:

- Supporting member-initiated account consolidation via fund search tools; - Implementing measures to reduce the proliferation of new accounts; - Mandating the consolidation of multiple accounts for individuals in the same fund; and - Instituting a Government-initiated clean-up of existing multiple accounts via automatic

consolidation of certain existing accounts.

3 The Hon Bill Shorten, A better deal for super fund members (21 September 2011) <http://ministers.treasury.gov.au/DisplayDocs.aspx?doc=pressreleases/2011/131.htm&pageID=003&min=brs&Year=&DocType=> 4 Stronger Super Information Pack, 21 September 2011, 12.

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2004

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Source(s): APRA Annual Superannuation bulletin, June 2010 (superannuation account data); ABS Australian Social Trends, cat. no. 4102.0 (labour force and employment data).

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The SuperStream package of reforms outlines a two-stage automatic consolidation process. Beginning in January 2014, they will target any accounts that are “inactive” (defined as two years without contributions or rollover) and have a balance of less than $1,000, as well as accounts in eligible rollover funds. These accounts will then be consolidated into the member’s current active account. In the latter half of 2014 the threshold for automatic consolidation will increase to at least $10,000.

2.2. Proposed auto-consolidation process The auto-consolidation process will be as follows:

1. The ATO will conduct a yearly review of accounts to identify any multiple accounts meeting the required criteria.

2. The ATO will then determine which of the multiple accounts the “active account” is (exact details not yet confirmed).

3. The active fund will be advised of the other accounts, and will be expected to arrange consolidation of those other accounts according to the following process:

a. The member will be sent correspondence advising them that the active fund will commence the automatic consolidation of the other accounts into the active fund unless the member indicates that they wish to retain those other accounts i.e. the member “opts-out”. This correspondence will advise the member of the need to consider insurance cover and other relevant information before deciding.

b. If the member does not respond to the correspondence in the prescribed time, the active fund will contact the other funds to arrange consolidation.

c. The trustees of the other funds will be required to transfer the account balance to the active fund within a prescribed time.


2.3. Research aims and limitations Based on the rules proposed above, is clear that the minimum information required to reasonably form a view on the outcomes of the consolidation process would include the following:

- Number of member accounts - Number of “inactive accounts” (no rollover or contribution for two years)5 - Number of members with less than $1,000 account balance (January 2014 – first phase) - No. of members with less than $10,000 account balance (late 2014 – second phase)

With the exception of the first item, the above information is not publicly available. Table 2 shows just how little reliable and publicly available information exists.

Information type Source Details Number of member accounts APRA APRA Annual Superannuation Bulletin Jun 2010 Number of “inactive accounts” Some available Superratings SMART – voluntary fund reporting Number of members with <$1,000 balance Not available - Number of members with <$10,000 balance Not available -

Table 2. Summary of auto-consolidation information sources

This means it is incredibly difficult to accurately project the outcome of the proposed account consolidation process with any degree of certainty. We believe it is important to recognise the following:

1. The authors of the reforms appear not to have relied upon or reviewed any specific data in developing the reforms or proposing them.

2. Account consolidation is likely to have an enormous effect upon the entire superannuation industry.

3. There is value in attempting to project the outcomes in order to prepare, and to assess any direct, and indirect consequences to each industry participant.

This paper aims to project a range of possible automatic consolidation outcomes using statistical data and a range of key assumptions (each of which are explained where used).

These projected outcomes are then used to understand and assess the potential impact upon an area of key importance that the reform process has to date ignored – any life insurance attached to accounts being consolidated.

It is important to note projections, for the most part, are based on reasoned assumption rather than specific data.

2.4. Projected account rationalisation outcome – $1,000 threshold The following section examines the number of accounts likely to be targeted during the proposed first phase, i.e. inactive accounts with less than $1,000 in January 2014 (“Phase 1”).

We confined our analysis to the top 10 funds from each APRA designated fund functional classification on the basis that this was a broadly representative group covering 71% of the total market (measured by number of members). In addition, we:

• ignored the presence of insurance;

• assumed that accounts targeted under Phase 1 would disappear as a result of the initiative; and

• have made a number of key projections and assumptions6.

5 Per the proposed definition within Stronger Super Information Pack, 21 September 2011, 12. 6 A summary of our figures and sources can be found in the Appendix.


The results are as follows: *APRA functional classification

No. of accounts (‘000s) - Top 10 funds from each major fund segment – <$1,000 Fund type* No. accounts before

consolidation No. accounts inactive

with < $1,000 bal. No. accounts after

consolidation Percentage reduction

Corporate 376.9 54.9 322.0 15% Industry 8,311.5 1,498.7 6,812.8 18% Public sector 2,026.4 413.3 1,613.1 20% Retail 7,208.6 1,094.4 6,114.2 15% Retail - ERF 5,426.9 5,318.3 108.6 98% Total 23,350.2 8,379.6 14,970.7 36%

Table 3. Projected account consolidation outcomes sub-$1,000

We project that Phase 1 will identify 8.3 million out of 23.3 million accounts or 36% of all accounts held within the top 10 funds from each major fund segment as being inactive with an account balance of less than $1,000.

Applying this percentage reduction to the total 32.8 million accounts7 we project that 11.8 million accounts are likely to be targeted as inactive with an account balance of less than $1,000.

2.5. Projected account rationalisation outcome – $10,000 threshold The following section examines the outcomes post the second phase, targeting inactive accounts with less than $10,000 (“Phase 2”). We employed the same methodology used in section 2.4, while excluding those accounts previously identified in section 2.4 as being inactive, with an account balance less than $1,000.

The results are as follows:

*APRA functional classification No. of accounts (‘000s) - Top 10 funds from each major fund segment – <$10,000

Fund type* No. accounts before consolidation

No. accounts inactive with < $10,000 bal.

No. accounts after consolidation

Percentage reduction

Corporate 322.0 47.6 322.0 15% Industry 6,812.8 1,298.8 5,514.0 19% Public sector 1,613.1 358.2 1,254.9 22% Retail 6,114.2 948.5 5,165.7 16% Retail - ERF 108.6 97.7 10.9 90% Total 14,970.7 2,750.8 12,267.5 18%

Table 4. Projected account consolidation outcomes sub-$10,000

We project that Phase 2 will identify a further 2.7 million out of the remaining 14.9 million accounts, or 18% of all accounts held within the top 10 funds from each major fund segment, as being inactive with an account balance of less than $10,000.

Applying this percentage reduction to the total 32.8 million accounts8, we project that a further 5.9 million accounts are likely to be highlighted as inactive with an account balance of less than $10,000.

7 Annual Superannuation Bulletin, APRA, June 2010 8 Annual Superannuation Bulletin, APRA, June 2010


2.6. Projected insurance exposure – $1,000 threshold We have now identified the potential number of accounts that will be affected by Phases 1 and 2, the majority of which have probably been set up in the past by (or for) the member as default superannuation accounts.

Given the universal acceptance by superannuation trustees to incorporate some minimum level of life insurance within default superannuation arrangements, often in the form of death and/or total and permanent disablement (“TPD”) insurance, it is also likely that a significant number of these accounts will have life insurance attached to them.

While it is becoming increasingly common for trustees to incorporate some form of income replacement insurance in the form of income protection (or group salary continuance), we have not reviewed income protection in this report.

To identify how many of the Phase 1 and Phase 2 inactive accounts may have insurance, it is necessary to take into account the following:

• Is insurance cover being offered to members who join on a default basis or is it available on a voluntary (by request and/or application) basis;

• How many members are likely to have cancelled or “opted-out” of this insurance;

• Will any default insurance continue under a member’s account after termination of employment;

• What rules may apply to any continuing cover, eg. minimum account balance, or specified time frames.

Table 5 summarises our findings after reviewing the top 10 funds in each fund segment and accounting for the considerations above.

*APRA functional classification No. of inactive accounts with insurance (‘000s) – <$1,000 Fund type* No. accounts inactive with <

$1,000 bal. No. accounts inactive with < $1,000 bal. with insurance

Percentage of inactive accounts with insurance

Corporate 54.9 32.8 60% Industry 1,498.7 1,350.40 90% Public sector 413.3 205.1 50% Retail 1,094.4 1,031.90 94% Retail - ERF 5,318.3 0.7 0% Total 8,379.6 2,620.90 31%

Table 5. Projected insurance exposure – <$1,000

We project that 2.6 million out of the 8.3 million inactive accounts, or 31% of those accounts held within the top 10 funds from each major fund segment, will have insurance attached to them.

We note that 5.3 million of these inactive accounts are unlikely to have any insurance at all – namely the ERF accounts.

Applying this insured account percentage to the total 11.8 million inactive accounts (under section 2.4) we project that 3.6 million of these accounts will have insurance.


2.7. Projected insurance exposure – $10,000 threshold The following section examines the outcomes post the second phase targeting inactive accounts with less than $10,000. We employed the same methodology used in section 2.4, excluding those accounts previously identified in section 2.4 as being inactive with an account balance less than $1,000.

The results are as follows:

*APRA functional classification No. of inactive accounts with insurance (‘000s) – <$10,000 Fund type* No. accounts inactive with <

$10,000 bal. No. accounts inactive with < $10,000 bal. with insurance

Percentage of inactive accounts with insurance

Corporate 47.6 28.4 60% Industry 1,298.8 1,170.4 90% Public sector 358.2 177.7 50% Retail 948.5 894.3 94% Retail - ERF 97.7 0.0 0% Total 2,750.8 2,270.8 83%

Table 6. Projected insurance exposure – <$10,000

We project that Phase 2 would affect a further 2.2 million or 83% of all accounts held within the top 10 funds from each major fund segment that are inactive with an account balance of less than $10,000.

Applying this insured account percentage to the total 5.9 million inactive accounts (under section 2.5) we project that 4.9 million of these accounts will have insurance.

2.8. Summary of projected insurance exposure It is clear from our research that a significant number of accounts will have death and/or TPD insurance benefits. Our projections regarding the total number of insured accounts that will be targeted for consolidation under the current proposed automatic consolidation rules are summarised in Table 7.

No. of accounts (‘000s) – Overall projected insurance exposure Projected total market Percentage of total market No. of accounts pre-consolidation 32,858 100% No. of accounts inactive and <$1,000 11,828 36% No. of accounts inactive and <$1,000 and insured 3,667 11% No. of accounts inactive and <$10,000 5,914 18% No. of accounts inactive and <$10,000 and insured 4,909 15%

Table 7. Impact of auto-consolidation on insured accounts

Under the proposed rules, 8.5 million insured accounts will be targeted for consolidation during Phase 1 and Phase 2, which equates to 25% of all accounts.


2.9. Sample examination of cover levels Our findings have confirmed the likely presence of insurance within many accounts targeted for automatic consolidation. In order to provide some meaningful context, we also analysed the average level of life insurance (death and/or death & TPD cover) held in superannuation accounts. Given the huge variation across the industry, we elected to sample a specific age group, age 39, from our standard representative group of the top 10 funds.

*APRA functional classification

Average default cover level for 39 yo – Top 10 funds from each major fund segment Fund type* No. of funds offering default cover9 Average default cover (where provided)

Corporate 3/10 $256,228 Industry 9/10 $200,992 Public sector 3/10 $297,274 Retail 9/10 $97,734 Retail - ERF 0/10 $0 Average 5/10 or 50% $170,446

Table 8. Average default cover level for 39 yo

A 39 year old with default insurance holds approximately $170,000 death and/or death & TPD life insurance cover under each default superannuation account.

2.10. Lack of guidance on insurance where consolidation occurs Having established the very real impact of the proposed automatic consolidation on insurance arrangements within targeted accounts, we note that so far, the rules relating to the life insurance (death, terminal illness, TPD, or income protection insurance) that may be attached to any inactive accounts have not been discussed by Government.

This makes it impossible at this stage for us to project what is likely to happen to this insurance under Phase 1 and 2, and for members and industry stakeholders (trustees, insurers and Government) to prepare. It is our understanding that consultation on the issue of automatic consolidation and insurance is currently underway, and this research paper aims to provide

The main two likely approaches are:

1. All insurance in the transferred/closed fund ceases.

2. Insurance in the transferred/closed fund is transferred to (or more correctly, matched by) the receiving fund.

Both of these approaches will have significant impacts for members, superannuation funds, insurers, and ultimately, the government. Section 3 of this paper explores those impacts.

9 We were not able to source sufficient information for many of the funds, and consequently, some funds were marked as not providing default cover. In reality it is likely that these numbers are much closer to 100% with the notable exception being ERFs which do not offer default insurance cover.


3. Insurance impacts and road test of 4 possible models

3.1. Insurance impacts The consolidation of accounts is intended to reduce the number of superfluous superannuation accounts, thereby reducing the cost to members directly (through savings in administration and management fees) and indirectly, through improved fund efficiencies gained by removing small accounts. These admirable aims should be weighed against the loss of any insurance attached to a consolidating account. We explore the insurance implications from the perspective of members, the government, and Trustees (and their life insurers) below.

Insurance issues for members 1. Delayed realisation in times of greatest need

This is the clearest issue for members (or their beneficiaries), and while it is the most obvious, it must be recognised that members may not realise the full impact of any cancellation of their cover until they need to claim – this lack of awareness is especially the case if cover is cancelled where members take no action.

2. The illusion of informed consent

It is an established principle that the vast majority of members do not actively respond to correspondence, meaning that the insurance cover outcome that applies in the event of no response from the member (whether merger or cancellation) will inevitably be the outcome for the overwhelming majority of members. We would argue strongly against the notion that members would make an informed decision if provided relevant information.

3. Uninformed decision making

If cover is cancelled or transferred to another insurer as a result of an automatic consolidation process, there is a real risk that members will not appreciate the value and importance of insurance cover. Ideally members should have access to financial advice and/or information from their fund before electing or omitting to act.

4. Loss of future insurability

Members who lose insurance may not be able to be insured again or may face increased premiums if their health circumstances have changed since they received the coverage.

5. Further increase to the “insurance gap”

The insurance gap in the Australian market is estimated to be around $669bn10. The introduction of near-universal insurance cover through default superannuation accounts has been a major factor in the narrowing of this significant gap between the life insurance needs of the average member, and their actual life insurance coverage.

6. Multiple, default insurance, even though not chosen is not automatically bad

As shown in our analysis, the average 39 year old would have approximately $170,000 coverage in the event of death or TPD. Even if this person held 3 separate superannuation accounts with default coverage under each providing total cover of $510,000, they would not be over-insured assuming an

10 Rice Warner, June 2010


average-sized mortgage and carer obligations. There is no doubt that some members, such as those in casual jobs and younger employees, will likely have too much insurance cover. But care must be taken to avoid stripping cover away from those members who do need it.

7. Pricing changes

Members currently enjoy the benefit of low premium rates for life insurance coverage under their superannuation. This benevolent pricing situation exists because coverage has been:

• automatic, reducing the impact of anti-selection (e.g. members in poor health taking out cover); and

• predictable, given the majority of members joined up under default arrangements tend to remain in the fund – driving the proliferation of accounts.

While clear that members would benefit from the number of super accounts being reduced, it should also be recognised that it will take some time for group life insurance pricing to adjust to any large-scale shift in insured membership.

Insurance issues for Trustees, Insurers and Government 1. Increased complaints and potential for loss to members and/or beneficiaries and claims for

compensation

The logical consequence of the loss of cover, in circumstances where members’ approval is not required, is a rise in the number of complaints and claims against Trustees and Insurers for compensation. There may be a need for statutory indemnification against claims from members where cover cancellation has occurred in accordance with the mandated automatic consolidation process – this in turn could lead to dissatisfaction with the initiative. This could be alleviated through the establishment of a no-fault compensation fund or similar.

2. Increased reliance on Government safety net where insurance cover is lost

Obviously where members are unable to claim insurance benefits as a result of losing coverage through the process of automatic consolidation, they will need increased Government-funded support.

3. Immediate “big-bang” impact on Trustees and Insurers

There will be an immediate, potentially large impact on funds and insurers, depending on how many default accounts are cancelled after the consolidation occurs – which cannot be predicted until the consolidation takes place.

4. Pricing changes

Insurance pricing will be impacted, as the overall insurance premium pool contracts – potentially triggering policy changes and affecting capital arrangements.

5. Transition costs for Trustees and Insurers

There will be significant insurance transition costs for trustees and insurers (e.g. contract alteration and renegotiation, and member communications) required to implement any new process.

6. Trustee guidance and statutory indemnification may be required

In light of their duties to protect members’ interests, Trustees may need to provide clarity around how they should deal with the potential negative impacts of automatic consolidation on members. This may be achieved by way of statutory indemnification.


3.2. Four possible automatic consolidation models Having established the need to consider insurance impacts of any automatic consolidation process, we explore four possible models and the likely account rationalisation and insurance impacts, recognising the countervailing aims of reducing multiple accounts and insuring against forced, early retirement due to ill-health through insurance. Each model is examined in light of account reduction, insurance impacts and implementation complexity.

Model 1: Any insurance held in an inactive account is cancelled, unless the member opts out.

This model will result in the largest reduction of inactive superannuation accounts but will also result in the greatest loss of attached life insurance.

We have projected the likely outcomes under this model during Phase 1 in Table 9 below. Note we have assumed a low opt-out rate based on reliable past experience.

*APRA functional classification Model 1 projected outcomes (<$,1,000) – Top 10 funds from each major fund segment

Fund type* No. accounts inactive with < $1,000 bal.

No. of insured amounts cancelled

Total no. accounts after consolidation

Percentage reduction from total

Corporate 54.9 31.7 322.0 14% Industry 1,498.7 1,439.3 5,514.0 18% Public sector 413.3 373.1 1,254.9 20% Retail 1,094.4 1,051.1 5,165.7 15% Retail - ERF 5,318.3 0.7 10.9 96% Total 8,379.6 2,895.9 12,267.5 35%

Table 9. Model 1 projected outcomes (<$,1,000) – Top 10 funds

We project that under Model 1, Phase 1 would result in a 35% reduction in the total number of superannuation accounts and the elimination of 2.8 million insured accounts from 8.3 million inactive accounts held within the top 10 funds from each major fund segment.

Applying this percentage reduction to the total 32.8 million accounts11 we project that 11.5 million accounts will remain after Phase 1, and 3.6 million insured accounts (and the insurance cover applicable within those accounts) are likely to be eliminated.

11 Annual Superannuation Bulletin, APRA, June 2010


Model 2: Any insurance held in an inactive account is merged into the active account, unless the member opts out.

Model 2 will not only meet the government’s objective with the highest rate of account consolidation, it will also reduce the impact to members arising from loss of insurance, by automatically (unless the member opts out) merging any insurance cover in an inactive account into a member’s active superannuation account.

Under Model 2, members’ cover will be altered, and/or reduced or increased, given the following:

• There is no guarantee that the “active” fund will offer the same type of insurance.

• There is often a significant difference in the way insurance cover is offered between different funds, e.g. one fund may offer a fixed sum insured, and another fund may offer cover according to a table of different amounts according to age – these differences would need to be dealt with.

• The premiums and insurance policy terms will vary between funds – leaving members potentially better or worse off.

While it is unlikely that a member will be covered in exactly the same manner pre-consolidation, this approach does ensure that a balance can be reached between rationalising account numbers and the minimising the loss of insurance protection.

The consolidation of insurance into active accounts will also increase the administrative requirements for fund Trustees and their insurers. We note that many funds currently support the transfer of insurance cover on an individual member level, which may provide a starting point for the development of appropriate industry-wide rules and processes.

*APRA functional classification

Model 2 projected outcomes (<$,1,000) – Top 10 funds from each major fund segment





Corporate 54.9 0.0 322.0 14% Industry 1,498.7 0.0 5,514.0 18% Public sector 413.3 0.0 1,254.9 20% Retail 1,094.4 0.0 5,165.7 15% Retail - ERF 5,318.3 0.0 10.9 96% Total 8,379.6 0.0 12,267.5 35%



Model 2 would provide the same outcome as Model 1 in terms of account rationalisation, without the loss of 2.8 million insured amounts from 8.3 million inactive accounts held within the top 10 funds from each major fund segment.

Applying this percentage reduction to the total 32.8 million accounts12 the insurance cover within 3.6 million insured accounts will be transferred along with the investment funds to the active fund where possible.

Model 3: Inactive accounts with insurance attached are exempt from the automatic consolidation phase, unless the member chooses to opt-in to consolidate and cancel any cover attached to their inactive account.

Under this model, any accounts with insurance targeted under Phase 1 would be exempt from automatic consolidation. It is likely that, even with the exclusion of inactive accounts with insurance attached, a significant level of consolidation will still be achieved given the large number of uninsured ERF accounts which would still be consolidated.

The benefits of this approach are:

1. No insurance is lost.

2. Members could still opt-in to consolidate their accounts and either cancel the insurance or apply to merge insurance held within those accounts.

3. The impact on Trustees and insurers posed by the transferral of insurance is minimal.

These benefits need to be considered in light of the likely reduction in the numbers of accounts rationalised. We project the outcomes in Table 11 below.








Corporate 54.9 0.0 375.8 0% Industry 1,498.7 0.0 8,281.5 0% Public sector 413.3 0.0 2,018.1 0% Retail 1,094.4 0.0 7,186.7 0% Retail - ERF 5,318.3 0.0 109.3 98% Total 8,379.6 0.0 17,971.4 23%


We project that under Model 3, Phase 1 would result in a 23% reduction in the total number of superannuation accounts without the loss of 2.8 million insured amounts from 8.3 million inactive accounts held within the top 10 funds from each major fund segment.

Applying this percentage reduction to the total 32.8 million accounts13 Model 3 would achieve a reduction of 7.5 million accounts without any significant loss of insurance cover. This is a reduction of 23%. Compared against Model 1, this approach would mean 3.6 million accounts would not be consolidated, while the insurance cover within those 3.6 million insured accounts will be preserved.

Model 4: All inactive accounts with insurance cover below a pre-determined threshold are merged and any insurance in those inactive accounts is cancelled. Inactive accounts with insurance above the threshold are exempt from the initial automatic consolidation phase, with opt-in opportunity to merge insurance into active account.

This model introduces a threshold insurance cover amount (e.g. $100,000 death cover) to determine whether accounts are automatically consolidated on an opt-out basis, or exempted from the target group.

This approach would preserve any substantial insurance cover held by members in their inactive accounts, but still mandates the elimination of lower levels of insurance cover. This would reduce the likelihood of complaints from members on the assumption the loss opportunity has a lower value.








Corporate 54.9 22.8 338.1 10% Industry 1,498.7 1,036.9 7,253.5 13% Public sector 413.3 268.8 1,734.6 14% Retail 1,094.4 757.2 6,435.9 11% Retail - ERF 5,318.3 0.7 109.2 98% Total 8,379.6 2,086.4 15,871.4 32%


We project that under Model 4, Phase 1 would result in a 32% reduction in the total number of superannuation accounts and a loss of 2.1 million insured accounts from 8.3 million inactive accounts held within the top 10 funds from each major fund segment.

Applying this percentage reduction to the total 32.8 million accounts14 Model 4 would achieve an overall reduction of 10.5 million accounts whilst confining the cancellation of insurance coverage to 2.9 million accounts with less than $100,000 cover.

3.3. Summary and comparison of outcomes under all models Table 13 compares the projected outcomes in terms of account reduction and potential loss of insurance cover under each of the four models in Phase 1 (targeting all inactive accounts with balances less than $1,000). The figures below are based on applying the results from our review of the Top 10 funds in each fund segment.

Comparison of projected outcomes (<$,1,000) – All funds

Model 1 All cover cancelled

Model 2 All cover transferred

Model 3 Exclude insured accts

Model 4 Exclude insured accts

>$100,00 cover

Total no. of accounts before 32,858 32,858 32,858 32,858 No. accts inactive & <$1,000 bal 11,829 11,829 11,829 11,829 Total no. of accounts after 21,358 21,358 25,301 22,343 No. of accounts eliminated 11,500 11,500 7,557 10,515 % reduction in no. of accounts 35% 35% 23% 32% No. of insured accts lost 3,667 0 0 2,936

Table 13. Comparison of projected outcomes (<$,1,000) – All funds

This provides some useful context to examine and compare the likely account reduction outcomes of each model, and the impact to insurance cover under each model. This comparison shows that there is a significant reduction to account numbers under Phase 1 under all of the models, including the model that excludes insured accounts altogether.

Notably, the comparison draws into sharp relief the trade-off between maximising account reduction and the potential for large-scale loss of insurance. For example, under Model 1, the “cost” of reducing 3.9 million accounts extra accounts would be the cover under 3.6 million accounts. Model 3 would preserve those insurance amounts, and Model 4 would likely deliver a compromise result.



3.4. Assessment of impacts of each model Table 14 below summarises and compares the broad implications of each model for the various stakeholders. Where a particular implication identified within the table applies under a particular Model, it is marked with “Y” for yes.

Implication for members Model 1 Model 2 Model 3 Model 4

Maintain similar level of insurance cover N Y Y Y

Loss of cover type Y Y N Y

Changes in terms of cover N Y N Y

Potential loss of client ability to claim Y Y N Y

Lack of appreciation for cover until it is cancelled Y Y N Y

Inability to seek financial advice on potential changes to cover. Y Y N Y

Potential inability to obtain the same levels of cover if health circumstances have changed.

Y Y N Y

Variability in premium rates Y Y N Y

Implication for Government Model 1 Model 2 Model 3 Model 4

Reduction in lost and inactive superannuation accounts Y Y Y Y

Development of policy and regulation to enable the consolidation Y Y Y Y

Potential increase in public welfare costs due to additional support for members and affected families who lose ability to claim

Y N N N

Potential increased complaints to bodies such as SCT for loss of cover due to prescribed transfers

Y N N Y

Potential requirement for Government-funded or mandated compensation fund to assist members affected by mandated consolidation

Y N N Y

Consider the need for trustee guidance and/or statutory indemnification for trustees and insurers against complaints or losses due to prescribed transfers

Y Y Y Y

Implication for Trustees and insurers Model 1 Model 2 Model 3 Model 4

Increase in complaints from members whose cover has changed Y Y Y Y

Cooperation between insurers, funds and trustees to devise acceptable merger rules including:

- universal “transfer rules” to govern joint liability - acceptable maximum limits - access to relevant cover information for transferring members - member communication

Y Y Y Y

Significant implementation and transition costs (e.g. contract alteration and renegotiation, and member communications administration system updates)

Y Y Y Y

Possibility of significant changes to member base (large increase or decrease of members, different demographics) triggering potential changes to premiums.

Y Y Y Y

Table 14. Implications of each automatic consolidation model


3.5. Level of impact arising from each model We have reviewed the above implications and assessed the overall impacts and outcomes under each model based on the following three key measures:

1. Achievement of the Government’s stated aim of reducing the number of unneeded superannuation accounts.

2. Minimising the loss of insurance coverage for existing insured members.

3. Reducing the administration burden and cost of implementation for Trustees and insurers.

The results of this analysis are summarised below in Table 15. It is clear from this exercise that no model will deliver optimal outcomes in all key measures.

However, we think it is critical to highlight all potential implications of any model, and to stimulate discussion and development of an appropriate model.

In our view, the final model must be decided with a clear understanding of the potential impacts on members and industry.

Impact on Model 1 Model 2 Model 3 Model 4

Government objective of account rationalisation* Low Low Med–High Med

Member insurance levels High Low–Med Low–Med Low

Implementation and administration complexity for Trustees and insurers Low High Med High

Table 15. Impact analysis of each automatic consolidation model


4. Conclusion 4.1. We all want to throw out the bathwater, but what about the baby? Reducing the number of unnecessary superannuation accounts will deliver enormous benefits to members – the most significant of which is the reduction of multiple account fees. And the most effective way to eliminate accounts is by employing the same approach taken to establish them in the first place, via an automatic, opt-out rule.

However, it is important to realise that because the vast majority of members are not engaged or interested in their superannuation (which is the reason super accounts have proliferated in the first place), any reduction achieved through such means will have been achieved without the informed consent of members – notwithstanding any disclaimers or warnings provided to members during the process.

Given this practical reality, it is clear that there is significant risk of unintended collateral damage, such as the impacts to the insurance coverage of members identified in our research. Unlike fees, insurance coverage is not an unnecessary duplicate cost, instead providing financial protection and it constitutes a valuable asset for many members.

In many cases where the multiplication of accounts has occurred, it may be that insurance coverage is closer to a reasonable minimum level of coverage, particularly if you consider the well-documented life insurance coverage gap that exists in Australia.

In addition, if coverage is lost, it may not be readily recoverable by members if their health or employment circumstances have changed. Our review shows there are options that may achieve significant account rationalisation while eliminating or minimising the impact to insurance coverage.

It is critical for all stakeholders to be aware of the impacts of this reform, and to actively consider the most appropriate method, as well as any contract, communication, procedural or system change required to facilitate. Stakeholders must also ensure that members are adequately informed, while Trustees and insurers are properly guided (or protected from complaint or claims where they have complied with mandated practice).

We agree with and support the goal of reducing the current numbers of superannuation accounts in Australia, particularly as our projections show that at least 25% of those accounts could be eliminated without impacting insurance coverage.

However, it is important to recognise that this oversupply situation has also resulted in widespread insurance coverage – and any rationalisation initiative is likely to impact this. And while it is tempting to discount these concerns by pointing out that members didn’t want or ask for this cover in the first place, we feel such arguments fail to appreciate the nature of superannuation (very few people choose insurance voluntarily but benefit nonetheless), and the very real impact on members who may be affected.

Our good intentions should not blind us to the human consequences of trying to stuff the genie back into the bottle.


5. Appendices 5.1. Appendix 1 – Auto-consolidation account projections for the top 10 funds in each sector

Auto-consolidation account projections for the top 10 funds in each sector (by no. of members)1 - TABLE AA B C D E F G H I J K L

Fund name Fund type

Number of members

(i.e. accounts)

('000)1

Total assets

($ million)1

Assumed %

exc luded (e.g.

pension accts)

Assumed

contributory accts

Assumed % inactive

(>2yrs since cont.)

Projected no. of

inactive accts

Assumed % of

inactive accounts

with <$1,000 bal

Projected no. of

inactive accounts

with <$1,000 bal

Assumed % inactive

accounts with

<$10,000 bal

Projected no. of

inactive accounts

with <$10,000 bal

Data source/calculation APRA1 APRA1 APRA1 Assumption2 = E x F Assumption3 13 = G x H Assumption4 = I x H Assumption4 = K x H

Telstra Superannuation Scheme Corporate 101.2 10,541.6 6% 95.08 35% 33.28 45% 15.0 39% 13.0

Officers' Superannuation Fund Corporate 64.8 6,393.7 6% 60.88 35% 21.31 45% 9.6 39% 8.3

Westpac Staff Superannuation Plan Corporate 36.4 2,929.3 6% 34.20 35% 11.97 45% 5.4 39% 4.7

National Australia Bank Group Superannuation Fund A Corporate 33.3 2,971.5 6% 31.28 35% 10.95 45% 4.9 39% 4.3

Qantas Superannuation Plan Corporate 32.7 5,500.5 6% 30.77 35% 10.77 45% 4.8 39% 4.2

ANZ Australian Staff Superannuation Scheme Corporate 30.4 2,182.0 6% 28.58 28% 8.00 45% 3.6 39% 3.1

Rio Tinto Staff Superannuation Fund Corporate 27.3 2,804.0 6% 25.70 35% 9.00 45% 4.0 39% 3.5

BHP Billiton Superannuation Fund Corporate 19.4 2,284.5 6% 18.20 35% 6.37 45% 2.9 39% 2.5

Suncorp Staff Superannuation Plan Corporate 16.9 708.5 6% 15.89 35% 5.56 45% 2.5 39% 2.2

IBM Australia Limited Superannuation Fund # Corporate 14.5 1,530.6 6% 13.67 35% 4.78 45% 2.2 39% 1.9

Retail Employees Superannuation Trust Industry 1,932.4 18,206.4 6% 1816.48 40% 726.59 45% 327.0 39% 283.4

AustralianSuper Industry 1,501.7 32,957.8 6% 1411.58 36% 508.17 45% 228.7 39% 198.2

Sunsuper Superannuation Fund Industry 1,186.1 16,200.5 6% 1114.90 44% 490.56 45% 220.8 39% 191.3

HOSTPLUS Superannuation Fund Industry 938.8 7,942.2 6% 882.50 45% 397.12 45% 178.7 39% 154.9

Health Employees Superannuation Trust Australia Industry 706.6 15,710.1 6% 664.24 46% 305.55 45% 137.5 39% 119.2

Construction & Building Unions Superannuation Industry 582.6 14,462.0 6% 547.66 35% 191.68 45% 86.3 39% 74.8

Unisuper Industry 470.0 28,643.7 6% 441.85 48% 212.09 45% 95.4 39% 82.7

Professional Associations Superannuation Fund Industry 448.1 1,556.3 6% 421.20 65% 273.78 45% 123.2 39% 106.8

MTAA Superannuation Fund Industry 289.4 5,853.6 6% 272.00 42% 114.24 45% 51.4 39% 44.6

Victorian Superannuation Fund Industry 255.8 7,245.8 6% 240.42 46% 110.59 45% 49.8 39% 43.1

First State Superannuation Scheme Public Sector 538.2 19,133.6 6% 505.94 60% 303.57 45% 136.6 39% 118.4

State Public Sector Superannuation Scheme Public Sector 538.2 28,295.5 6% 505.89 31% 156.83 45% 70.6 39% 61.2

Public Sector Superannuation Scheme Public Sector 246.3 11,443.1 6% 231.49 31% 71.76 45% 32.3 39% 28.0

CSS Fund Public Sector 143.4 4,789.4 6% 134.84 60% 80.90 45% 36.4 39% 31.6

Military Superannuation & Benefits Fund No 1 Public Sector 138.6 3,260.3 6% 130.32 55% 71.68 45% 32.3 39% 28.0

Local Authorities Superannuation Fund Public Sector 107.2 3,938.7 6% 100.75 56% 56.42 45% 25.4 39% 22.0

Public Sector Superannuation Accumulation Plan Public Sector 97.8 2,049.1 6% 91.97 60% 55.18 45% 24.8 39% 21.5

Local Government Superannuation Scheme - Pool A Public Sector 90.7 2,847.4 6% 85.30 60% 51.18 45% 23.0 39% 20.0

Local Government Superannuation Scheme Public Sector 78.7 4,385.5 6% 73.98 60% 44.39 45% 20.0 39% 17.3

Australia Post Superannuation Scheme Public Sector 47.2 5,894.6 6% 44.35 60% 26.61 45% 12.0 39% 10.4

AMP Superannuation Savings Trust Retail 2,643.6 43,481.1 6% 2485.01 35% 869.75 45% 391.4 39% 339.2

The Universal Super Scheme Retail 1,226.9 30,734.4 6% 1153.27 35% 403.64 45% 181.6 39% 157.4

OnePath Masterfund Retail 984.6 25,526.0 6% 925.48 35% 323.92 45% 145.8 39% 126.3

Colonial First State FirstChoice Superannuation Trust Retail 620.9 35,395.1 6% 583.65 35% 204.28 45% 91.9 39% 79.7

Westpac Mastertrust - Superannuation Division Retail 397.9 5,407.1 6% 374.07 46% 172.07 45% 77.4 39% 67.1

ASGARD Independence Plan Division Two Retail 320.0 14,984.4 6% 300.77 35% 105.27 45% 47.4 39% 41.1

IOOF Portfolio Service Superannuation Fund Retail 298.1 9,248.0 6% 280.18 35% 98.06 45% 44.1 39% 38.2

Suncorp Master Trust Retail 254.7 5,317.4 6% 239.39 35% 83.79 45% 37.7 39% 32.7

Super Directions Fund Retail 234.5 2,660.4 6% 220.46 35% 77.16 45% 34.7 39% 30.1

Mercer Super Trust Retail 227.4 13,690.4 6% 213.80 44% 94.07 45% 42.3 39% 36.7

Advance Retirement Savings Account Retail - ERF 36.4 207.5 0% 36.43 100% 36.43 98% 35.7 2% 0.7

AMP Eligible Rollover Fund Retail - ERF 364.9 1,471.1 0% 364.92 100% 364.92 98% 357.6 2% 6.6

Australian Eligible Rollover Fund Retail - ERF 1,065.0 877.4 0% 1064.96 100% 1,064.96 98% 1043.7 2% 19.2

Australia's Unclaimed Super Fund Retail - ERF 1,947.1 564.1 0% 1947.14 100% 1,947.14 98% 1908.2 2% 35.0

National Preservation Trust Retail - ERF 597.3 346.8 0% 597.30 100% 597.30 98% 585.4 2% 10.8

SuperTrace Eligible Rollover Fund Retail - ERF 1,416.1 1,601.9 0% 1416.10 100% 1,416.10 98% 1387.8 2% 25.5

23,350.2 464,174.7 2.4 22,274.8 22.9 12,229.7 23.9 8,379.6 15.7 2,750.8

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5.2. Appendix 2 – Insurance projections for the top 10 funds in each sector

Auto-consolidation insurance projections for the top 10 funds in each sector (by no. of members)1 - TABLE BO P Q R S T V W X Z

Fund name Fund type

Cover continues if

inactive?

Time limit for cover

whilst inactive?

Account balance

limit?

Default cover

amount (age 39) Default cover type

Projected no. of

insured accounts

(inactive & <$1,000

bal)

Projected no. of

insured accounts

(inactive & <$10,000

bal)

Average death or

DTPD insurance

amount (based on

age 39 default

cover amount &

where cover is

provided)

Data source/calculation APRA1 RW6 RW6 RW6 RW6 RW6 Assumption5 (to J) Assumption5 (to L) T8

Telstra Superannuation Scheme Corporate Yes No Unknown 229,256.6 DTPD 14.7 12.7 229,257

Officers' Superannuation Fund Corporate Yes No No 269,713.6 DTPD 9.4 8.1 269,714

Westpac Staff Superannuation Plan Corporate No N/A N/A N/A N/A 0.1 0.1 0

National Australia Bank Group Superannuation Fund A Corporate No N/A N/A N/A N/A 0.1 0.1 269,714

Qantas Superannuation Plan Corporate Yes No No DTPD 4.7 4.1 0

ANZ Australian Staff Superannuation Scheme # Corporate Yes No 7,500.0 Unknown Death 3.5 3.1

Rio Tinto Staff Superannuation Fund Corporate No N/A N/A N/A N/A 0.1 0.1 0

BHP Billiton Superannuation Fund Corporate No N/A N/A N/A N/A 0.1 0.0 0

Suncorp Staff Superannuation Plan Corporate No N/A N/A N/A N/A 0.1 0.0 0

IBM Australia Limited Superannuation Fund # Corporate No N/A N/A N/A N/A 0.0 0.0 0

Retail Employees Superannuation Trust Industry Yes No 1,200.0 232,000 DTPD 320.4 277.7 232,000

AustralianSuper Industry Yes 13m 1,000.0 132,900 DTPD 224.1 194.2 132,900

Sunsuper Superannuation Fund Industry Yes No 1,500.0 197,000 Death 216.3 187.5 197,000

HOSTPLUS Superannuation Fund Industry Yes No No 232,132 Death 175.1 151.8 232,132

Health Employees Superannuation Trust Australia Industry Yes No No 140,600 DTPD 134.7 116.8 140,600

Construction & Building Unions Superannuation Industry Yes No 1,200.0 200,000 DTPD 84.5 73.3 200,000

Unisuper Industry Yes No 2,000.0 164,000 Death 93.5 81.1 164,000

Professional Associations Superannuation Fund Industry Unknown 2.5 2.1

MTAA Superannuation Fund Industry Yes No No 102,300 DTPD 50.4 43.7 102,300

Victorian Superannuation Fund Industry Yes No No 408,000 DTPD 48.8 42.3 408,000

First State Superannuation Scheme Public Sector Yes No No 336,222 Death 133.9 116.0 336,222

State Public Sector Superannuation Scheme Public Sector Unknown 1.4 1.2

Public Sector Superannuation Scheme Public Sector Unknown 0.6 0.6

CSS Fund Public Sector Unknown 0.7 0.6

Military Superannuation & Benefits Fund No 1 Public Sector Unknown 0.6 0.6

Local Authorities Superannuation Fund Public Sector Yes No No 253,500 DTPD 24.9 21.6 253,500

Public Sector Superannuation Accumulation Plan Public Sector No N/A N/A N/A N/A 0.5 0.4 0

Local Government Superannuation Scheme - Pool A Public Sector Yes No No 302,100 DTPD 22.6 19.6 302,100

Local Government Superannuation Scheme Public Sector Yes No No Unknown 19.6 17.0

Australia Post Superannuation Scheme Public Sector Unknown 0.2 0.2 0

AMP Superannuation Savings Trust Retail Yes No No 200,000 DTPD 383.6 332.4 200,000

The Universal Super Scheme Retail Yes No No Employer selected 178.0 154.3

OnePath Masterfund Retail Yes No No 108,800 DTPD 142.8 123.8 108,800

Colonial First State FirstChoice Superannuation Trust Retail Yes No No Employer selected 90.1 78.1

Westpac Mastertrust - Superannuation Division Retail Yes No No Employer selected 75.9 65.8

ASGARD Independence Plan Division Two Retail Yes No No Employer selected 46.4 40.2

IOOF Portfolio Service Superannuation Fund Retail Yes No No 55,914 DTPD 43.2 37.5 55,914

Suncorp Master Trust Retail Yes No No 26,222 DTPD 36.9 32.0 26,222

Super Directions Fund # Retail Yes No No Employer selected 34.0 29.5

Mercer Super Trust Retail Unknown 0.8 0.7

Advance Retirement Savings Account7 Retail - ERF Yes Unknown Unknown Member selected 0.7 0.0

AMP Eligible Rollover Fund Retail - ERF N/A N/A N/A N/A N/A 0.0 0.0 0

Australian Eligible Rollover Fund Retail - ERF N/A N/A N/A N/A N/A 0.0 0.0 0

Australia's Unclaimed Super Fund Retail - ERF N/A N/A N/A N/A N/A 0.0 0.0 0

National Preservation Trust Retail - ERF N/A N/A N/A N/A N/A 0.0 0.0 0

SuperTrace Eligible Rollover Fund Retail - ERF N/A N/A N/A N/A N/A 0.0 0.0 0

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5.3. Appendix 3 – Insurance projections for the top 10 funds in each sector for each auto-consolidation model

Auto-consolidation insurance projections for the top 10 funds in each sector (by no. of members)1 - TABLE CO P EE FF GG HH II JJ KK LL MM NN OO PP QQ RR SS TT

Fund name Fund type

Model 1 outcome -

<$1,000 (accounts

retained)10

Model 1 outcome

<$1,000 (insured

accounts

cancelled)

Model 1 outcome -

<$10,000 (accounts

retained)10

Model 1 outcome

<$10,000 (insured

accounts

cancelled)

Model 2 outcome -

<$1,000 (accounts

retained)10

Model 2 outcome

<$1,000 (insured

accounts

cancelled)

Model 2 outcome -

<$10,000 (accounts

retained)10

Model 2 outcome

<$10,000 (insured

accounts

cancelled)

Model 3 outcome -

<$1,000 (accounts

retained)10

Model 3 outcome

<$1,000 (insured

accounts

cancelled)

Model 3 outcome -

<$10,000 (accounts

retained)10

Model 3 outcome

<$10,000 (insured

accounts

cancelled)

Model 4 outcome12 -

<$1,000 (accounts

retained)10

Model 4 outcome12

<$1,000 (insured

accounts

cancelled)

Model 4 outcome12 -

<$10,000 (accounts

retained)10

Model 4 outcome12

<$10,000 (insured

accounts

cancelled)

Data source/calculation APRA1 = 2% x J

= (J - EE) x 98%

[ERF=2%] =2% x L

= (L - GG) x 98%

[ERF=2%] = 2% x J = 011 =2% x L = 011 = 98% x J [ERF=2%] = 011 = 98% x L [ERF=2%] = 011 = 30% x 98% x J = (J - QQ) x 98% = 30% x 98% x L = (L - SS) x 98%

Telstra Superannuation Scheme Corporate 0.30 14.4 0.3 12.5 0.3 0.0 0.3 0.0 14.7 0.0 12.7 0.0 4.4 10.4 3.8 9.0

Officers' Superannuation Fund Corporate 0.19 9.2 0.2 8.0 0.2 0.0 0.2 0.0 9.4 0.0 8.1 0.0 2.8 6.6 2.4 5.7

Westpac Staff Superannuation Plan Corporate 0.11 0.0 0.1 0.0 0.1 0.0 0.1 0.0 5.3 0.0 4.6 0.0 1.6 0.0 1.4 0.0

National Australia Bank Group Superannuation Fund A Corporate 0.10 0.0 0.1 0.0 0.1 0.0 0.1 0.0 4.8 0.0 4.2 0.0 1.4 0.0 1.3 0.0

Qantas Superannuation Plan Corporate 0.10 4.7 0.1 4.0 0.1 0.0 0.1 0.0 4.7 0.0 4.1 0.0 1.4 3.4 1.2 2.9

ANZ Australian Staff Superannuation Scheme # Corporate 0.07 3.5 0.1 3.0 0.1 0.0 0.1 0.0 3.5 0.0 3.1 0.0 1.1 2.5 0.9 2.2

Rio Tinto Staff Superannuation Fund Corporate 0.08 0.0 0.1 0.0 0.1 0.0 0.1 0.0 4.0 0.0 3.4 0.0 1.2 0.0 1.0 0.0

BHP Billiton Superannuation Fund Corporate 0.06 0.0 0.0 0.0 0.1 0.0 0.0 0.0 2.8 0.0 2.4 0.0 0.8 0.0 0.7 0.0

Suncorp Staff Superannuation Plan Corporate 0.05 0.0 0.0 0.0 0.1 0.0 0.0 0.0 2.5 0.0 2.1 0.0 0.7 0.0 0.6 0.0

IBM Australia Limited Superannuation Fund # Corporate 0.04 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.1 0.0 1.8 0.0 0.6 0.0 0.5 0.0

Retail Employees Superannuation Trust Industry 6.54 314.0 5.7 272.1 6.5 0.0 5.7 0.0 320.4 0.0 277.7 0.0 96.1 226.2 83.3 196.1

AustralianSuper Industry 4.57 219.6 4.0 190.3 4.6 0.0 4.0 0.0 224.1 0.0 194.2 0.0 67.2 158.2 58.3 137.1

Sunsuper Superannuation Fund Industry 4.42 212.0 3.8 183.7 4.4 0.0 3.8 0.0 216.3 0.0 187.5 0.0 64.9 152.7 56.2 132.4

HOSTPLUS Superannuation Fund Industry 3.57 171.6 3.1 148.7 3.6 0.0 3.1 0.0 175.1 0.0 151.8 0.0 52.5 123.6 45.5 107.2

Health Employees Superannuation Trust Australia Industry 2.75 132.1 2.4 114.4 2.7 0.0 2.4 0.0 134.7 0.0 116.8 0.0 40.4 95.1 35.0 82.4

Construction & Building Unions Superannuation Industry 1.73 82.8 1.5 71.8 1.7 0.0 1.5 0.0 84.5 0.0 73.3 0.0 25.4 59.7 22.0 51.7

Unisuper Industry 1.91 91.7 1.7 79.4 1.9 0.0 1.7 0.0 93.5 0.0 81.1 0.0 28.1 66.0 24.3 57.2

Professional Associations Superannuation Fund Industry 2.46 118.3 2.1 102.5 2.5 0.0 2.1 0.0 120.7 0.0 104.6 0.0 36.2 85.2 31.4 73.9

MTAA Superannuation Fund Industry 1.03 49.4 0.9 42.8 1.0 0.0 0.9 0.0 50.4 0.0 43.7 0.0 15.1 35.6 13.1 30.8

Victorian Superannuation Fund Industry 1.00 47.8 0.9 41.4 1.0 0.0 0.9 0.0 48.8 0.0 42.3 0.0 14.6 34.4 12.7 29.8

First State Superannuation Scheme Public Sector 2.73 131.2 2.4 113.7 2.7 0.0 2.4 0.0 133.9 0.0 116.0 0.0 40.2 94.5 34.8 81.9

State Public Sector Superannuation Scheme Public Sector 1.41 67.8 1.2 58.7 1.4 0.0 1.2 0.0 69.2 0.0 59.9 0.0 20.7 48.8 18.0 42.3

Public Sector Superannuation Scheme Public Sector 0.65 31.0 0.6 26.9 0.6 0.0 0.6 0.0 31.6 0.0 27.4 0.0 9.5 22.3 8.2 19.4

CSS Fund Public Sector 0.73 35.0 0.6 30.3 0.7 0.0 0.6 0.0 35.7 0.0 30.9 0.0 10.7 25.2 9.3 21.8

Military Superannuation & Benefits Fund No 1 Public Sector 0.65 31.0 0.6 26.8 0.6 0.0 0.6 0.0 31.6 0.0 27.4 0.0 9.5 22.3 8.2 19.3

Local Authorities Superannuation Fund Public Sector 0.51 24.4 0.4 21.1 0.5 0.0 0.4 0.0 24.9 0.0 21.6 0.0 7.5 17.6 6.5 15.2

Public Sector Superannuation Accumulation Plan Public Sector 0.50 0.0 0.4 0.0 0.5 0.0 0.4 0.0 24.3 0.0 21.1 0.0 7.3 0.0 6.3 0.0

Local Government Superannuation Scheme - Pool A Public Sector 0.46 22.1 0.4 19.2 0.5 0.0 0.4 0.0 22.6 0.0 19.6 0.0 6.8 15.9 5.9 13.8

Local Government Superannuation Scheme Public Sector 0.40 19.2 0.3 16.6 0.4 0.0 0.3 0.0 19.6 0.0 17.0 0.0 5.9 13.8 5.1 12.0

Australia Post Superannuation Scheme Public Sector 0.24 11.5 0.2 10.0 0.2 0.0 0.2 0.0 11.7 0.0 10.2 0.0 3.5 8.3 3.1 7.2

AMP Superannuation Savings Trust Retail 7.83 375.9 6.8 325.8 7.8 0.0 6.8 0.0 383.6 0.0 332.4 0.0 115.1 270.8 99.7 234.7

The Universal Super Scheme Retail 3.63 174.4 3.1 151.2 3.6 0.0 3.1 0.0 178.0 0.0 154.3 0.0 53.4 125.7 46.3 108.9

OnePath Masterfund Retail 2.92 140.0 2.5 121.3 2.9 0.0 2.5 0.0 142.8 0.0 123.8 0.0 42.9 100.9 37.1 87.4

Colonial First State FirstChoice Superannuation Trust Retail 1.84 88.3 1.6 76.5 1.8 0.0 1.6 0.0 90.1 0.0 78.1 0.0 27.0 63.6 23.4 55.1

Westpac Mastertrust - Superannuation Division Retail 1.55 74.4 1.3 64.5 1.5 0.0 1.3 0.0 75.9 0.0 65.8 0.0 22.8 53.6 19.7 46.4

ASGARD Independence Plan Division Two Retail 0.95 45.5 0.8 39.4 0.9 0.0 0.8 0.0 46.4 0.0 40.2 0.0 13.9 32.8 12.1 28.4

IOOF Portfolio Service Superannuation Fund Retail 0.88 42.4 0.8 36.7 0.9 0.0 0.8 0.0 43.2 0.0 37.5 0.0 13.0 30.5 11.2 26.5

Suncorp Master Trust Retail 0.75 36.2 0.7 31.4 0.8 0.0 0.7 0.0 36.9 0.0 32.0 0.0 11.1 26.1 9.6 22.6

Super Directions Fund # Retail 0.69 33.3 0.6 28.9 0.7 0.0 0.6 0.0 34.0 0.0 29.5 0.0 10.2 24.0 8.8 20.8

Mercer Super Trust Retail 0.85 40.7 0.7 35.2 0.8 0.0 0.7 0.0 41.5 0.0 36.0 0.0 12.4 29.3 10.8 25.4

Advance Retirement Savings Account7 Retail - ERF 0.71 0.7 0.0 0.0 0.7 0.0 0.0 0.0 0.7 0.0 0.0 0.0 0.2 0.7 0.0 0.0

AMP Eligible Rollover Fund Retail - ERF 7.15 0.0 0.1 0.0 7.2 0.0 0.1 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Australian Eligible Rollover Fund Retail - ERF 20.87 0.0 0.4 0.0 20.9 0.0 0.4 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

Australia's Unclaimed Super Fund Retail - ERF 38.16 0.0 0.7 0.0 38.2 0.0 0.7 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

National Preservation Trust Retail - ERF 11.71 0.0 0.2 0.0 11.7 0.0 0.2 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

SuperTrace Eligible Rollover Fund Retail - ERF 27.76 0.0 0.5 0.0 27.8 0.0 0.5 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0

167.59 2,895.91 55.02 2,509.19 167.59 0.00 55.02 0.00 3,000.79 0.00 2,600.08 0.00 900.24 2,086.44 780.02 1,807.65

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Sources and notes for Tables A, B & C: 1Superannuation Fund-level Rates of Return , APRA, June 2011 (Issued 27 January 2011)2Based on publicly available information for selected funds3Consolidation of superannuation accounts report prepared for CHOICE, Rice Warner Actuaries, Hattingh et al., November 2006 & TAL estimates based on client-sourced data4TAL estimates based on client-sourced data5Assumes 98% coverage rate where cover continues for inactive members; 2% coverage rate where cover doesn't continue for inactive members (TAL estimates)6Information sourced from Rice Warner Group Insurance Comparator as at February 2012 & public domain7Assumes 2% coverage rate given cover does not appear to be default8Given cover levels generally fluctuate with age, this figure is purely indicative.9Based on Average Weekly Earnings, Full-time, ABS, of $1,296.70 <http://www.abs.gov.au/ausstats/[email protected]/mf/6302.0> 10Assumes that 2% of people will actively retain their account in an "opt-out" situation, and that 98% of people who don't opt-out will have default insurance. ERFs assumption as to coverage is 2% 11No insurance would be lost under this model given cover is proposed to be merged into the new fund12Based on death cover and a "nominal insurance amount" of $100,000. Assumed that 30% of accounts with the default level of cover will have cover <$100,000 based on a review of major default 13Some inactive information is sourced from Superratings SMART report, 25/2/2012 1:08 PM (figures are bold where used)14Annual Superannuation Bulletin , APRA, June 2010

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