The most significant change is that from 1 July 2019, superannuation funds can no longer automatically deduct life insurance premiums from a super account that has been inactive – that is, received no contributions or rollovers – for 16 months or more, and has a balance under $6,000.
In a nutshell - if no contributions have been made to your super fund in the last 16 months (as at 30 June 2019 and then on a rolling basis going forward), then your super account may be deemed to be “inactive” and your current insurance policies could be cancelled. They cannot be re-instated under the same conditions once cancelled, and this may leave you with less insurance cover than you would like as a result.
The flip side of these changes is that the recently released Protecting Your Super reforms will prevent superannuation funds from charging premiums on insurance cover you might not need. But it is important you make an informed decision before any insurance you have is cancelled!
There is further good news in that exit fees for those wishing to swap funds will be removed and caps will be imposed on certain fees for account balances under $6,000.
If you are one of the many people with a number of small super accounts as a result of working a number of jobs over the years, there could be more good news. Fund members with balances under $6,000 whose accounts have been inactive for 16 months will have their accounts paid to the Australian Tax Office (ATO), and the ATO will take proactive steps to consolidate this with your active super fund.
What does an 'inactive account' mean?
Inactive accounts have been classified as accounts that have not had any contributions for a consecutive period of 16 months by either yourself or your employer.
What can I do about it?
Other than continuously making contributions to your account, you can contact your super fund and elect to opt in to retain your current insurance cover – but you have to do so before 1 July 2019. In other words - the clock is ticking if you decide you want to “opt-in” to retain your insurances.
If you have any questions about your levels of insurance cover, or the structure of your superannuation in general, one of our local financial advisers will be happy to arrange an appointment to discuss how they may be able to help you make better choices for a better life.