(Realise Your Dream)
By Peter Kelly
Superannuation is not something we usually give a great deal of thought to, particularly if retirement is 10 years or more away.
But perhaps it is worth investing a few moments to consider some recent changes, particularly if you have one or more super accounts that have become inactive.
When the government talks about a super account being inactive, they are generally referring to an account that has not received contributions or rollovers from another super fund in the previous 16 months. That is an important number to keep in mind.
If you have a close look at your super account statement, you may notice that insurance premiums are being deducted. This happens because many superannuation funds are required to provide a level of default life insurance cover. The sad thing is most people don’t even realise they have this insurance.
In last year’s Federal Budget, the government announced changes to super that were deigned to stop the erosion of super balances by fees, charges and unnecessary insurance premiums.
Without getting into the technicalities of the legislative process, let’s look at one important changes that is due to take effect from 1 July 2019.
And that relates to insurance for inactive account holders.
In simple terms, where a member of a superannuation fund has an inactive account – that is, the account has not received contributions or rollovers from other super funds within the previous 16 months – the fund will be prevented from offering or maintaining insurance for the member.
This means that super fund members may lose valuable insurance protection.
The legislation places some onerous conditions on trustees of super funds.
Firstly, where insurance is already in place within a choice or MySuper product, the trustees of the fund are required to identify, as at 1 April 2019, member accounts that have been inactive for a period of more than 6 months. They must write to each member before 1 May 2019 advising the insurance will be discontinued from 1 July 2019, but that cover may be continued if the member wishes, and setting out the manner in which the member can opt-in to retain their insurance.
Secondly, trustees must inform members of their fund on an ongoing basis when an account has been inactive for nine months, then again at 12 months and 15 months.
If a member wishes to maintain their insurance cover within their super fund, they will need to take proactive steps to ensure it is retained. This may be done by making a contribution, rolling over a benefit from another super fund, or simply instructing the super fund, in writing, that they wish to retain their insurance cover. This is referred to as ‘opting-in’
Insurance is vitally important for many people.
With this in mind, and with the changes to the legislation, it is worth taking time to review the various super accounts you have with particularly reference to the insurance that may be embedded. If you no longer need the insurance, then asking your super fund to cancel it may help prevent the erosion of your super balance. However, if you need the insurance, taking steps to ensure it is maintained, particularly if you have an inactive account will be vitally important.
If you receive correspondence from the trustees of your fund advising that your cover will be discontinued and you wish to retain your cover, it would be prudent to make the formal election to opt-in, irrespective of what action you may have taken in the past. At this time, having a financial planner or an insurance specialist review your super and insurance cover might make a lot of sense.
PK believes people have the right to accurate, affordable and unbiased information that addresses all aspects of their preferred retirement lifestyle, thereby giving them the opportunity to make informed decisions that will empower them to live out their lives with dignity, certainty and security.
Tealey’s ambition is to change how people think about their retirement, he wants people to dream, plan and realise retirement is not defined by a magical age prescribed by the legislation.