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3 changes to your superannuation you need to know about

The government’s Protecting Your Super package comes into effect on 1 July. 

protecting your superannuation
Last updated: 01 July 2019

By now, you've probably seen the ads urging you to check your super before new laws come in.

These new laws form the government's Protecting Your Super package, and they'll change three things about super from 1 July 2019: 

  • Super funds will only be allowed to charge a maximum of 3% of the balance in administration and investment fees for accounts under $6000.
  • Super funds will be banned from charging you an 'exit fee' if you transfer your account (or part of your account) to another fund.
  • 'Inactive' accounts under $6000 will be closed down and the money transferred to the Australian Taxation Office (ATO).

This last change is the most complex.

Could I lose the life insurance cover from my super fund on 1 July 2019?

From July, super funds will no longer automatically provide life insurance to people with inactive super accounts. 

Your account will be considered inactive when it hasn't received any money into it in the past 16 months.

Many Australians have had their super accounts eroded by insurance that doesn't suit their needs or that they don't want. The Protecting Your Super changes will help address this problem.

Your super fund should have sent you a letter or email letting you know if your insurance could cut out in the new financial year.

What happens to my super if my account is 'inactive'?

If your account is inactive, the ATO will look after your money until it can be matched with an active account. 

While your money is sitting with the ATO you won't be charged fees, but growth will only keep pace with inflation. Inflation is usually much lower than the interest rate you would have earned from your super fund. 

When your super balance is transferred across to the ATO it will also cancel any life insurance you may have had. However, you can still keep your insurance, you just need to let your fund know. 

You also don't have to wait for the ATO to find an active super account for you. You can track down and consolidate all of your inactive accounts through the my.gov.au website. Consolidating your super accounts is an easy process that should only take a few minutes online.

What kind of cover do I get from the life insurance in my super? 

Life insurance in your super can include:

  • Death-only cover. This means your beneficiaries (usually people like a partner or a family member) receive money if you die.
  • Total and permanent disability cover (TPD). This varies between policies, but the basic idea is you receive money if you become injured or ill to the point where it's unlikely you'll work again.  
  • Income protection (sometimes called 'salary continuation insurance'). This provides you with money to compensate for your lost salary if you suffer a temporary illness or disability and are unable to work.

Why did I have this cover and not know about it? 

You could be forgiven for not even knowing you were paying for life insurance in your super – one in four Australians aren't aware of whether they have this insurance or not.

Around half of Australians with super accounts have some level of life insurance cover from their super fund. If you were one of the people who didn't make a choice about your super fund, you would have 'defaulted' into a MySuper account that will have some life insurance.

Why am I paying for life insurance in my super anyway? 

Although far too many people have been paying for life insurance that didn't suit their needs, for some it is the quickest and easiest way to get cover.

Super funds can essentially buy insurance cover in bulk and pass the savings onto you. 

Automatically being eligible for this insurance can also be very handy. It means you don't have to do any medical testing to qualify like you would if you bought insurance on your own. It can also be much easier to get cover if you already have a medical condition.

How do I decide if I need cover and what level of cover is right for me?

ASIC's MoneySmart website has some more information to help you decide whether you need life insurance.

This content was produced by Super Consumers Australia which is an independent, nonprofit consumer organisation partnering with CHOICE to advance and protect the interests of people in the Australian superannuation system.

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