A Senate committee reviewing the Turnbull Government’s planned reform of life cover in superannuation has backed the measures.

Phasing out exit fees on super accounts and removing default cover for under-25s and members with low balances are among key measures in the Treasury Laws Amendment Bill.

The committee says the changes are necessary to protect retirement savings and ensure the continued success of the $2.6 trillion system.

“A one-size-fits-all approach, particularly with regard to fees and the provision of default insurance, is no longer appropriate,” the Senate Economics Legislation Committee says. 

“The current design of Australia’s superannuation framework has led to extensive proliferation of accounts and serious erosion of members’ balances through excessive fees and inappropriate insurance arrangements.

“The committee considers that the measures in this Bill are an important first step in addressing these issues and will have tangible benefits for Australians’ retirement savings.”

Consultants Rice Warner and KPMG have warned the opt-in arrangement could have negative consequences.

Rice Warner estimates premiums may rise 11.1% because the move will reduce the opportunity for cross-subsidisation by age, and KPMG believes members who remain insured will be slugged with premium rises of 26%.

But the committee says the premium-rise scenarios “demonstrate the substantial cross-subsidies” inherent in the current system.