New superannuation legislation is coming into effect on 1 July 2019. The new laws are designed to protect your superannuation from fee erosion. However, they could also remove some of the insurance that you currently have within your superannuation if you don’t take the necessary action.
The Government’s ‘Protecting Your Super’ package – announced in the 2018-19 Budget – is a comprehensive package of regulatory reforms designed to protect Australians’ superannuation savings from undue erosion by fees and insurance premiums.
The new rules will apply from 1 July 2019. They will:
- Ban exit fees
- Cap super fees at three per cent per financial year for accounts with a balance $6,000 or less.
- Prevent default insurance being provided (and premiums deducted) for members with inactive super accounts.
- Require the transfer of inactive accounts (for example, those that have not received a contribution in 16 months or longer) with a balance below $6,000 to the ATO.
Will this affect me?
Before taking action, your super provider must tell you that you’re at risk of having your insurance cancelled and give you the opportunity to choose to keep your insurance. If the changes affect you, you should receive a letter from your Super fund telling you about any accounts that are inactive or alerting you that your existing insurance may expire.
What do I do if I want to keep my insurance?
If you don’t want to lose your super insurance, you simply need to let your super provider know before July 1 2019. Making a super contribution or rollover into an account that’s considered inactive will also stop the insurance cancellation from going ahead. You could then set up small regular contributions to prevent the account from becoming inactive again. The legislated start date for this measure is 1 July 2019. If your account is identified as inactive your super fund must attempt to contact you before this date to give you the opportunity to choose to retain your insurance.
You may need to act if…
You have applied for insurance, and been medically and financially assessed in the past, and you have set up a specific superannuation fund (keeping the balance low) to pay for the insurance premiums only.
You have existing Level-Premium Insurance policies in place – and you cannot move them – and you are paying via a linked superannuation fund.
You have superannuation in an industry fund with a low balance due to the fact that you can’t apply or obtain any further insurance due to current health issues.
You’re not working and are living on your Income Protection payments via Superannuation and hence are not making contributions.
You are on Maternity leave and haven’t contributed to your superannuation whilst on leave for more than 16 months.
You are a sole trader who had some insurance within your low balance superannuation fund when you were an employee but haven’t been contributing since you’ve been self-employed.
You haven’t made a contribution for 16 months. This will lead an account to be classified as ‘inactive’ and any attached insurance will be cancelled unless you notify the Super fund otherwise.
You need to opt in before the 1st of July 2019. After this date inactive accounts will be transferred to the ATO.
We will do our best to contact clients wherever possible to make sure that they don’t lose out on any superannuation balances or insurance that they may wish to keep. However, if you need help or administrative support with this please get in touch. Call us anytime on (02) 8268 2900 if you’d like to discuss any of the above further.