Labor has rebuked the government for abandoning a central plank of its superannuation reforms, as the Coalition confirmed it will pass Greens amendments that continue automatic life insurance cover for young workers.

The Coalition’s Protecting Your Super package aims to save workers up to $2.6bn in fees by ending automatic life insurance premiums for workers under 25 and savers with balances under $6,000, while consolidating unwanted duplicate superannuation accounts through the Australian Taxation Office.

After the Australian first reported that the government was preparing to do a deal with the Greens, Senator Peter Whish-Wilson confirmed to Guardian Australia the Coalition had approached the party and he is now “confident” it will support all the Greens’ amendments.

The Greens amendments would continue opt-out life insurance cover for young workers and those with low balances, neutering one of the central planks of the original bill but retaining other provisions which consolidate lost savings.

The finance minister, Mathias Cormann, told the Senate on Thursday the Coalition would agree to the Greens’ amendments “to facilitate passage of this bill and allow key measures to come in by 1 July”.

Those include capping fees at 3% a year for accounts with balances of less than $6,000 and abolishing exit fees on all super accounts, which Cormann said would be “to the great benefit of all Australians”.

“Even if we can’t get 100% of what we want legislated – we secure the passage of what we can.”

Cormann said the Coalition would “separately seek to pursue” its plan to make life insurance cover opt-in for young workers, a sign it would reintroduce the measure if it gets enough crossbench votes or attempt the measure again after the election.

Earlier the shadow treasurer, Chris Bowen, said that “after months of bluster the Liberals are about to announce a deal with the Greens to gut the centrepiece” of their legislation.

“They said it was vital to protecting young members’ super and now they are junking their own bill!”

After months of bluster the Liberals are about to announce a deal with the Greens to gut the centrepiece of the Protecting Your Super legislation - they said it was vital to protecting young members' super and now they are junking their own Bill! @JoshFrydenberg you’re all talk pic.twitter.com/9xIHe1CBeC — Chris Bowen (@Bowenchris) February 14, 2019

Labor offered to support the bill subject to amendments to continue opt-out life insurance cover for workers from high-risk industries and provided lost savings were reunited with their member within a month.

Whish-Wilson told the Senate that stakeholders who favoured ending automatic life insurance – such as the Grattan Institute and Productivity Commission – were well-intentioned but dealt with the average impact of fees on workers.

He said the Greens had insisted on opt-out cover to protect vulnerable workers such as young blue-collar workers up ladders on construction sites because “nobody needs insurance until they need it”.

Whish-Wilson told Guardian Australia the government had supported the Greens’ amendments on their merits because they were “quite surgical and very precise” and denied horse-trading or making other concessions.

Centre Alliance’s Stirling Griff told the Senate the minor party would support the bill but was “disappointed” the government had taken so long to introduce legislation.

The reform was first announced by the former financial services minister Kelly O’Dwyer in the 2018 federal budget.