The proposed measures will make it easier to keep your super in order. But remain alert with regards to your insurance cover.
The insurance cover offered by your super fund can be a convenient and cost-effective way to protect yourself and your income. But younger people who do not have children, homes or substantial assets probably have little need for insurance through super.
If you’re a younger worker, some of the super proposals announced in the recent budget could affect you. Some are positive, especially if you’ve just started working and are beginning to build your super, as your balance won’t be eroded by fees. But there are some traps to be aware of with the proposed changes to insurance. Read on for a quick summary.
Automatic cover to be changed to opt in
Under the current super rules, we are legally required to provide you with automatic insurance cover when you join the fund as a MySuper member - that is, when you join us because your employer has chosen us as their default super fund. Because it’s automatic you don’t have to approve the type and amount of cover, which could mean you’re paying for insurance you may not know you have.
The budget included a proposal to change from the current automatic cover arrangement to one where you opt-in for insurance cover. The choice to opt-in will apply if:
- your account balance is less than $6,000
- you are under the age of 25
- your account has not received a contribution for 13 months and is deemed ‘inactive’.
What is your automatic cover?
If you are an eligible MySuper member your automatic insurance entitlement is three units of death and total permanent disablement cover^1. As an example, one unit of death and TPD cover for a 25-year-old working in education is $127,911, so three units provides cover of $383,733. This is the amount that you (or your nominated beneficiaries) could receive if you die, have a terminal illness, or are permanently unable to work due to injury or illness.
Why is this change important to me?
If passed, this change will take effect on 1 July 2019 and you’ll have 14 months to opt-in to the insurance cover before it is switched off. The purpose is to help ensure that your super savings aren’t eaten up by fees paid for insurance you don’t want or may not be aware of. It should also help you avoid paying for multiple insurance policies, if you have more than one fund.
Other proposed changes to super fees
- From 1 July 2019, super funds will no longer be permitted to charge exit fees.
- Also from this date, a 3% annual cap on passive fees charged by super funds on accounts with balances below $6,000 will be introduced.
Once I was lost, but now I’m found
Many young Australians have multiple super accounts, usually because they’ve had multiple jobs. The government wants to reduce the number of accounts floating around in ‘super space’ so from 1 July 2019, all inactive superannuation accounts below $6,000 will be transferred to the ATO. Where possible, the ATO will reunite these inactive superannuation accounts with the member’s active account. You can search for lost super using.
For young workers with lots of super accounts sucking up fees and insurance premiums, (as well as those with low account balances or no contributions for 13 months) the changes proposed in this year’s budget can help them to more easily manage and retain their super savings. It’s a good idea to stay mindful of the changes, particularly those who want to hold insurance through their super. We will keep you informed if or when these changes become law.
Automatic cover is subject to you satisfying eligibility conditions, such as being at work on the date your employment commenced. Please see the relevant Member Booklet Supplement for your account type for more information. ↩