Understanding the Key Changes to Superannuation Insurance (Effective 1 July 2019)
On 1 July 2019, the Federal Government introduced significant reforms to superannuation insurance. These changes aimed to reduce unnecessary fees, eliminate duplicate accounts, and protect Australians’ retirement savings. Here’s what you need to know about these changes and their implications.
What Is an Inactive Superannuation Account?
An inactive superannuation account is one that hasn’t received any contributions or rollovers for 16 months or more. These accounts were identified as a potential risk to members' retirement savings due to ongoing insurance premiums and account fees eroding balances.
Key Changes Introduced
1. Automatic Cancellation of Insurance for Inactive Accounts
- Insurance coverage was automatically cancelled for accounts with no contributions for 16 months.
- Members who wanted to retain their insurance needed to:
- Make a contribution.
- Notify their super fund of their intention to keep the insurance before the cut-off date.
2. Mandatory Member Communication and Action
- Superannuation funds were required to notify members of impending cancellations.
- Members needed to act by either:
- Making a contribution.
- Explicitly opting in to retain coverage.
- Failure to act resulted in a lapse of insurance coverage.
3. Impact on Insurance Claims
- Existing claims for Total and Permanent Disability (TPD) or Income Protection (IP) lodged before the account became inactive were unaffected.
- Members who hadn’t lodged a claim could still proceed based on their coverage status when they became disabled or last worked.
4. Reduction of Duplicate Accounts and Fees
- The reforms aimed to consolidate multiple super accounts, reducing redundant fees and insurance premiums.
- This step helped protect retirement savings from unnecessary erosion.
Challenges for Lost Members
A lost member is someone whose super fund has lost contact with them and whose account is inactive. Lost members face several risks:
1. Unclaimed Superannuation Monies
- Accounts with low balances may be transferred to the Australian Taxation Office (ATO), complicating future claims and disrupting insurance coverage.
2. Lack of Communication
- Without updated contact details, members may miss important notifications, leading to unintended lapses in coverage.
3. Multiple Accounts
- Lost members often hold multiple accounts, incurring duplicate fees and premiums that erode savings.
4. Loss of Insurance Coverage
- If insurance lapses due to inactivity, members who later become disabled or pass away may no longer have coverage.
Practical Steps for Members
1. Verify Account Activity
- Regularly check super accounts for recent contributions.
- Use MyGov, contact the ATO, or seek expert advice.
2. Make Contributions or Opt-In
- Ensure insurance coverage by:
- Making a voluntary contribution.
- Notifying your super fund to retain coverage.
3. Evaluate Insurance Needs
- Assess whether retaining insurance is essential, especially if:
- You have health concerns.
- You’re working part-time.
- You have financial obligations like a mortgage.
4. Seek Professional Advice
- Consult financial counsellors or legal experts like Claimsplus Lawyers to navigate these changes and protect your entitlements.
Why These Changes Matter
The 2019 reforms were a significant step towards protecting Australians’ retirement savings from erosion. They aimed to consolidate super accounts, reduce unnecessary fees, and ensure members only paid for the insurance they needed.
However, proactive steps are essential to maintain coverage and avoid unintended lapses.
Need Help Navigating Superannuation Insurance Changes?
If you’re unsure how these changes affect you or need assistance managing your superannuation accounts, Claimsplus Lawyers can help. Contact us today for expert advice and tailored support.
Contact Claimsplus Lawyers Today
For expert guidance on superannuation claims and entitlements, contact us today:
Phone: | 1800 252 460 |
Email: | claims@claimsplus.com.au |
Website: | https://claimsplus.com.au |
Let us help you navigate your super claims and secure the financial support you deserve.
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