The initial rules on insurance premiums in the Federal Government’s new MySuper legislation will allow member deductions for life insurance premiums, despite them not being a “permitted fee”.

The low-cost superannuation product will be required to offer life insurance cover for members, but only allows fees for administration, investment, switching and exit.

But the explanatory notes accompanying the Superannuation Legislation Amendment (MySuper Core Provisions) Bill state a MySuper administrator can deduct insurance premiums from members’ accounts.

“That premium may reflect the characteristics of the member such as age and occupation, and may also reflect the member’s choice of coverage,” the notes say. “Later tranches of legislation will include rules in relation to insurance cover in MySuper products.” 

Fees for advisers providing advice on insurance will also be covered in later tranches of the legislation.

Introducing the bill into Parliament last week, Assistant Treasurer Bill Shorten said MySuper delivers a 2010 election commitment for a simple product.

“It’s fair for the superannuation industry to contribute to higher retirement savings through greater efficiency and lower fees,” he said. “MySuper will provide a simple, cost-effective default product that all Australians can rely on. 

“MySuper will be limited to a common set of features to make it easier for members, employers and other stakeholders to compare performance across MySuper products, placing downward pressure on fees.”

The Australian Prudential Regulation Authority will regulate MySuper products and it will be responsible for publishing data on the funds.