Advisers should rethink whether high levels of insurance cover should be held in super following proposed changes to the concessional contributions cap, research from DEXX&R suggests.
Members with lower levels of cover inside super could be allocating a greater portion of the concessional cap to pay premiums for their cover, according to a DEXX&R statement.
“A member aged 50 next birthday with $2 million death and TPD and $12,000 per month income protection could be paying 42 per cent of their total concessional cap of $25,000 in insurance premiums,” the statement said.
“By age 55 next birthday, a member could be allocating 71 per cent of the $25,000 concessional contribution cap to insurance premiums.”
“Financial planners will need to consider … the impact on retirement income for members with balances that are well below the $1.6 million threshold that can be transferred on retirement to a complying income stream,” the statement said.
ifa previously reported that the changes to superannuation announced in this year’s federal budget will see more financial advisers focus on investment strategies outside of super.