This is the last week for many superannuation fund members with inactive accounts to tell those funds if they want to continue their life insurance cover.
Most people who have superannuation also have some life and disability insurance cover as part of their super fund.
Under new laws starting on 1 July 2019, super funds will cancel the insurance cover on accounts that have not received any contributions for at least 16 months unless the member elects to continue the cover. Members need to take action now to continue insurance cover in superannuation fund.
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In addition, inactive accounts with balances under $6,000 will be transferred to the Australian Taxation Office (ATO). If the ATO can establish a person has another active fund, the ATO will merge the funds. If not, the ATO will keep the super safe.
The new laws are designed to stop people from paying unnecessary insurance premiums, which can erode retirement savings. We all support these changes.
‘Not everyone needs to retain insurance. People who already have cover and/or are young, healthy and have no dependents are less likely to need life insurance,’ explained Gerard Brody, CEO of the Consumer Action Law Centre.
‘Insurance held through a super fund can be a cost-effective way to buy life insurance. You can choose to keep your cover if you want it – but you need to tell your fund before the end of June’ said Mr Brody.
‘However, the changes could detrimentally impact people who could benefit from insurance in super, but haven’t read, understood or even received a notice about an inactive account and will therefore not make an informed choice to keep it,’ said Fiona Guthrie CEO of Financial Counselling Australia.
‘These potentially include people who are caring for children, people in the gig economy, people with chronic illnesses and indigenous communities,’ Ms Guthrie said.
Super funds across the country are contacting members who will lose their insurance to explain the changes. ‘If you have received a letter or email from your super fund, make sure you read it’ advised AIST spokesperson Ailsa Goodwin.
If you need help to keep your insurance, you should contact your super fund. You can also contact the National Debt Helpline on 1800 007 007 for help in understanding the changes.
ASIC’s MoneySmart website also contains information about the new laws: https://www.moneysmart.gov.au/superannuation-and-retirement/is-your-super-on-target
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