Following on from the Productivity Commission Review, a number of recommendations were made in regards to superannuation funds. Many of these recommendations have now been legislated and changes will come into effect 1 July, 2019.
The reforms are intended to protect Australians’ retirement savings by ensuring super isn’t unnecessarily eaten up by fees and premiums on insurance policies.
Most people have default insurance in their super for total and permanent disability (TPD), as well as income protection insurance. These policies, in practice, are designed to help you financially when you need them most.
Effective 1 July, 2019, the following changes could affect you:
- Insurance policy cancelled for inactive accounts: if your superannuation account has not had any contributions either by you or your employer for a continuous period of 16 months, regardless of the balance, then your default TPD and income protection insurance will be cancelled. Simply, you will not be covered if the unthinkable happens.
- Inactive super accounts with low balances will be closed: if you have stopped work temporarily, taken maternity leave or even started your own business, you probably aren’t receiving any payments into your super account and you could be at risk of not having any cover or having your account closed and transferred to government operated super fund MyGov.
- Cap on fees for accounts with low balances: a positive change in that if your account has a balance of $6000 or less, fees will be capped at 3% per annum, ensuring the funds aren’t eaten away by fees and charges.
- No exit fees: if you wish to change funds you will no longer be slugged with penalty charges as exit fees will be banned across the board.
So what can you do to make sure you are covered from 1 July?
- Contact your superannuation fund and elect to opt-in to the default insurance regardless of your account being inactive.
- Make your own contribution into your account which will reactivate the account for a further 16 months.
- Importantly, make sure you read all emails and letters your super fund sends you. It’s important that you invest time now understanding what insurances you do and don’t have in your super before you need it most.
Shine Lawyers - we're here to help
Shine Lawyers have an experienced legal team to assist everyday Australians with accessing their super and insurance entitlements in the event that they cannot work due to injury or illness. Our lawyers are experts in Superannuation and TPD claims and can answer any questions you may have about your potential super entitlements. Contact us now.
Written by Will Barsby. Last modified: October 17, 2019.