Important changes are happening to super which could mean you lose your life insurance. On July 1 2019, millions of super insurance policies will be automatically shut down as part of Protecting Your Super.
Protecting Your Super is a government initiative to help reduce unwanted fees and charges eating into your nest egg – especially on accounts where there’s little to no activity – by automatically removing default fees like life insurance fees.
While the change is a positive step overall, it’s been implemented so swiftly that many Australians don’t even know it’s coming, let alone if they’re affected. In fact, according to data from the Association of Superannuation Funds of Australia (ASFA), more than 50 percent of Aussies were left in the dark about the changes, having no idea they were about to take place.
It’s really important you know about these changes as the implications could be huge, with your loved ones potentially missing out on millions in the event of your death. Read on to find out what you need to know.
Who it impacts
If you have a super account that has been inactive for 16 months or more, the default life insurance cover will be switched off automatically on July 1.
If you’re a regular contributor to your super fund and there’s been activity over the past 16 months, you have nothing to worry about. But if you have multiple super funds, some of which are inactive, or you have been out of the workforce or self-employed and not making contributions within the last 16 months, then it’s highly likely you will be one of millions of Australians affected.
Many of our clients will be impacted by the changes. Some have chosen to hold insurance within inactive super accounts because the premiums are cheaper or they can no longer take out new policies because of pre-existing medical conditions. Others have taken time out of the workforce to raise families or have become self-employed, leaving their super accounts inactive over the previous 16 months.
What you need to do
Super funds have an obligation to contact members to inform them of the changes, but we know these communications can easily get buried in inboxes!
The easiest way to know if you’re affected is to search for and read any communication your super fund has sent you. This might be via mail, email or SMS. Your fund will probably simply require you to check a box online confirming if you wish to retain your insurance.
That said, if you can’t find communication from your provider and are in the slightest bit of doubt, we recommend either making contact yourself or logging onto timetocheck.com.au.
Get on top of your super
Recent surveys have shown that the majority of Australians aren’t up-to-date with super knowledge, making them prime candidates for missing default fees and charges. These amounts do add up and can see your money start going backwards, so use this time to check any other default fees and charges your account might have and making sure they’re worth it in your current circumstances.
If you do have multiple super funds we recommend consolidating them into one, checking off the fees and charges and making sure you’re opting for a fund that’s right for your circumstances.
For advice on fees and consolidation, check out our article 6 hacks to boost your super now.
Seek help if you’re unsure
When it comes to shopping around for your super fund, knowing which one is right for you and your circumstances can be difficult. Throw in fees, charges, insurances and changes to legislation, knowing which super account to consolidate into might be something you need to speak to an expert about.
If you’re unsure of how these recent changes will affect you, or have any questions about super, we recommend speaking to us to get the clarity and advice you need to make informed decisions.
Rebecca is passionate about promoting the positive impact of quality financial advice on personal wellbeing. Read her full bio here.
