Insurance requirement a ‘nanny-state overreach’
The SIS regulation specification that forces trustees to actively review their SMSF insurance requirements is “legislative overreach” and is not applicable to many clients, according to a practice principal.
This requirement, first enacted 7 August 2012 and set out in section 4.09 2(e) of the Superannuation (Supervision) Regulations 1994, does not make insurance mandatory but does force the trustee to review the insurance arrangements for the fund on a regular basis, ie annually.
Quantum Financial principal Tim MacKay said he “begrudged” by the fact it is compulsory that insurance has to be considered.
“I mean why not have annuities in there? You don’t have to consider annuities – I think it’s a nanny-state overreach,” said Mr MacKay.
“I think it is best practice to consider it, [but] I just don’t think it should be in the legislation.”
Clients in their 80s, Mr MacKay said, don’t understand why they are being asked to consider life insurance when it’s clearly not available to them and isn’t relevant.
“Also, clients who are in the 60s and 70s; again it’s not applicable. Certainly for younger clients it is an issue and best practice, and should be considered,” he said.
“So it is best practice and a legal requirement, but I just think it’s a bit of legislative overreach.”