The Federal Government could face a considerable increase in disability payments if young people lose their insurance cover due to the proposed changes to account thresholds for lost super members.

Treasury is proposing to lift the threshold for lost or inactive superannuation accounts to $6000. But REST super fund says nearly 70% of its members under the age of 30 have account balances of less than that.

“Insurance offered through super is the cheapest form of insurance available to young people and there is no requirement to provide health evidence for basic cover,” REST says in its submission to Treasury.

“If these people are transferred to the Australian Taxation Office upon becoming classified as lost members, they would lose their insurance automatically.”

The fund is calling for inactive and small balance members to be left in their current funds rather than being transferred to the ATO, where they would receive no cover.

REST says “people who least can afford medical bills” would be placed in a position of needing to pay for treatment or access free healthcare.

This will have an impact on the health system as large numbers of young people will not be able to pay for their own healthcare or rehabilitation.

“These services must be provided by the government at taxpayers’ expense, not independently funded through insurance premiums paid from super,” the fund says.

It says there would also be an impact on affected members’ beneficiaries, especially if the former member dies without any cover.

The super fund says a funeral can cost more than $10,000 and if there had been a payout from death cover, the beneficiaries would not have any financial worries.

There would also be an impact on the super fund with the loss of potentially 975,000 members with account balances under $6000.

REST has 438,966 inactive members and 28,298 members who haven’t responded to two items of mail.

“If these members were deemed lost then this will result in a smaller pool of members to negotiate insurance premiums and charges,” the fund said.

“REST provides insurance to its members at a group rate through its insurers using its buying power to negotiate group insurance costs that compare favourably with those rates negotiated by individuals in the market.”