Consumer advocates are calling for the Federal Government to change elements of its reintroduced insurance-in-superannuation bill or scrap it altogether.

The groups say vulnerable people would be caught under the proposed legislation, which would make insurance optional for under-25s or with less than $6000 in super.

In a joint submission to the Senate Economics Legislation Committee, the Consumer Action Law Centre and the Financial Rights Legal Centre say people returning to work from parental leave or for other reasons, recent migrants and those whose employers are not paying super contributions would not be making enough contributions to avoid being caught in the legislation. They argue for the insurance to be kept opt-out for low-balance active accounts.

Rice Warner gave near identical warnings last week, as well as raising concern that graduates would be caught in the changes.

“While we acknowledge the significant impact of balance erosion on low-balance accounts, it does not follow that people do not need insurance simply because they have less than $6000 in superannuation,” the submission says.

The beneficial impact of topping up retirement income when a person’s working life is cut short from injury is arguably much greater for a person with a low account balance than someone with a substantial account balance, it says.

Women in Super is “strongly opposed” to the bill and wants it withdrawn, saying the proposed changes “would affect many women and their dependents, ironically including many women entering or re-entering employment following a period of maternity leave”.

“It is totally unacceptable that these members find themselves without total and permanent disability insurance, income protection insurance or life insurance,” it says in its submission.

All three groups argue the Government should at least wait until the impact of previously passed legislation which scraps insurance for inactive super accounts and consolidates inactive accounts is known.

The FRLC and CALC are also warning that the timeframes proposed in the bill are too compressed. If the bill is passes, trustees must send notices to fund members before August 1 this year, and members must opt-in by October 1. Trustees only need to write to members once, and there are no follow-up requirements if members can’t be contacted. Research shows many people are not engaged with their super and may not realise they need to take urgent action.

Many of these problems were exposed through the previous bill, they add.