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 donâ€™t even realise they have this
In last yearâ€™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, letâ€™s look at one important changes that is due to take effect from 1
And that relates to insurance for inactive account holders.
In simple terms, where a member of a superannuation fund has
an inactive account â€“ that is, the account has not received contributions or
rollovers from other super funds within the previous 16 months â€“ the fund will
be prevented from offering or maintaining insurance for the member.
This means that super fund members may lose valuable
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 â€˜opting-inâ€™
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.