Most wage and salary earners worry that when retirement day rolls around their Superannuation pot will have enough money to tide them over for the remaining years of their lives. Exactly how much money they will receive will be an unknown factor - until the payout happens.
A lot of factors come together in determining the depth of the Superannuation pool. The administrators need to make sound investment choices. The government needs to keep inflation under control. The Australian economy needs to remain healthy - and we need to avoid another world economic meltdown like the events of 2008.
Unfortunately, a cost rise seems inevitable to one of the Superannuation components. Most Superannuation policies contain a life insurance guarantee of at least $ 200,000 to compensate for the early death of a contributor, when the contribution balance is still minuscule, and the premium rate is governed by that persons occupation. Obviously, the "risk factor " is important in setting a premium for life insurance cover.
It is alarming to learn that the Life Insurance industry suffered a $ 343 million loss last year and this followed a $ 122 million loss in the previous year. Premiums are set to rise and it looks like blue collar workers may face a 30% increase and white collar workers something above 15%. There is talk of an average 27% rise across all sectors to bring life insurance back to good health.
Obviously, any increase in operating costs has a detrimental effect on final payouts and this is bad news for those with intermittent access to permanent employment. The entire structure of Superannuation is based on continuous contributions over a persons entire working life and any gaps lower the payout. Women are particularly vulnerable if they disengage from paid work for family reasons during their child bearing years.
In this instance, the insurance actuaries who calculate premiums seem to have got it wrong. Perhaps they miscalculated the trend of ever increasing life expectancy and used this to assume contributions continuing longer to offset death rates, only to have many people retiring early - and upset this balance. Whatever the cause, it is inevitable that the insurance component of Superannuation is about to take a hike.
More importantly, the blow will fall more heavily on those with a higher risk exposure. A man whose occupation involves digging trenches will certainly attract a much higher insurance component than an IT worker in a city office, and the route dispatcher of a trucking company will fare a lot better than one of it's long distance drivers.
That is something to be taken into account when making plans for the future. What you do for a living during your working life will certainly have an effect on how you will spend your retirement years !
No comments:
Post a Comment