The Federal Coalition has called for the third MySuper bill to be withdrawn, claiming it needs more industry consultation.

It has also issued a report saying the legislation has serious flaws that must be addressed.

The Parliamentary Joint Committee on Corporations and Financial Services (PJC) has recommended the bill go ahead.

But Opposition superannuation spokesman Mathias Cormann says the Labor Party is trying to allow the automatic transfer of members’ super balances into a default MySuper account, which would have a serious impact on the life insurance industry.

“It also has massive potential implications for the insurance arrangements people have organised within their chosen superannuation fund,” he said.

“If automatically transferred, MySuper death and total and permanent disability insurance cover could well be less than that currently enjoyed by a member in his or her chosen fund.”

Senator Cormann says some people may not qualify for insurance in a MySuper product, or will be forced to accept less cover.

“There is absolutely no way the Coalition would support legislation that does all of those things.”

But the PJC says concerns over members losing insurance has been “overstated” by some parties.

It says members will have 90 days’ notice of any movement of funds into a MySuper product, including changes to insurance arrangements.

“The committee does not believe the transition to MySuper… will pose difficulties for members that are transferred to MySuper products in terms of losing insurance,” the PJC’s report says.

“The trustee of the MySuper product and the chosen default fund will generally be the same entity, and the trustee will continue to have a close relationship with its insurer.”

PJC Chairman Deborah O’Neill says trustees will have to ensure MySuper products do not disadvantage members.

“Super trustees will also have until July 1 2017 to transfer amounts to a MySuper product,” she told Parliament last week.

“This is a considerable and appropriate period to ensure trustees communicate properly with members who need to be notified that they will be moved to a MySuper product.

“Government members of the committee are confident the… time frame will enable trustees to develop clear and effective communication strategies with these members, to ensure the difficulties foreseen by some stakeholders are minimised.”