Will you be affected by new super changes?
On 1 July 2019, a raft of new super changes are to come into
effect. They are primarily designed to protect younger workers and those with
low account balances.
To stop the superannuation accounts of vulnerable Australians being eroded by
life insurance premiums, a number of changes are set to come into effect on 1
July 2019 as part of the Treasury Laws Amendment (Protecting Your
Superannuation Savings Package) Bill 2018.
Under the proposed rules, MySuper and choice of fund members will need to
deliberately opt-in for life insurance (Life, TPD and Income Protection) inside
super where:
- They are under age 25;
- Their account balance is less than $6,000; and
- Their account has not received a contribution for 16 months.
This is a significant change from the current opt-out model where fund members automatically get a level of cover.
How will ‘inactive’ clients be affected?
One strategy that is sometimes recommended to clients is to open or maintain group life insurance inside an industry or retail superannuation fund to get a level of cover (especially if there are pre-existing health issues preventing obtaining insurance otherwise).
This ‘set and forget’ strategy is at risk under the proposed legislation because trustees are required to obtain confirmation from inactive account members that they still wish to retain life insurance.
If the member in this situation does not ‘opt-in’ then the life insurance inside the superannuation fund must be cancelled. This provision applies regardless of the amount of assets that are remaining in the fund, and it applies to both choice and MySuper arrangements.
How will younger clients and those with low account balances be affected?
Written direction by a member, who is either under 25 or who has a balance of less than $6,000, to opt into insurance will be valid indefinitely unless the superannuation account subsequently becomes inactive. An election to opt-in to insurance cover by a member who is under 25 will be taken to satisfy the opt-in requirement for low balance accounts, and vice versa.
Members with superannuation account balances of less than $6,000 who made elections prior to 1 April 2019, will be deemed to be effective on 1 July 2019 and will not need to be provided written notices. Elections made prior to the 8 May 2018 will also be effective after 1 July 2019.
Action Required:
Should you hold an inactive superannuation account, be under the age of 25 or have a fund with less than $6,000 and wish to maintain your insurance cover, you need to contact your superannuation fund prior to 1st July 2019 to opt-in for your insurance to continue.
In summary, those who want certainty regarding their life insurance cover
inside superannuation should see a financial adviser. Obtaining personal
financial advice and being individually underwritten appears to satisfy the
opt-in requirements that commence on 1 July 2019, for clients under age 25 and
those with balances under $6,000. Opt-in insurance requirements still apply to
everyone who has inactive accounts for 16 months or more.
Should you require assistance or have any questions regarding the above, the team at Personal Risk Professional are happy to assist and can be reached as follows:
- Phone: 1300 367 844
- Email: insurance@personalriskprofessionals.com
- Office: Level 6, 307 Queen Street, Brisbane QLD 4000
- www.personalriskprofessionals.com
Alternatively, contact your financial adviser.
*This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, you should consider whether the information is appropriate in light of your particular objectives, financial situation and needs.
