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.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.