Disclaimer
Information provided on this website is general in nature and does not constitute financial advice. Every effort has been made to ensure that the information provided is accurate. Individuals must not rely on this information to make a financial or investment decision. Before making any decision, we recommend you consult a financial adviser to take into account your particular investment objectives, financial situation and individual needs.
Why your insurance within super could be at risk from July 1
Anyone holding insurance inside of super must be aware of the upcoming changes to inactive accounts, and to take prompt action if they wish to avoid having insurance they need cancelled.
What is changing?
From 1 July this year, super funds will be required to cancel insurance cover within accounts if the account is deemed inactive.
An inactive account is defined as any super account that:
- has not received a contribution or rollover for 16 continuous months, and
- the member has not opted in to continue their insurance cover.
What you need to do
Open your mail and emails from your super fund.
If you have a retail fund/s (bank or fund manager owned e.g. BT, SOLAR, Colonial FS)
Super trustees of retail funds were required to write to any affected members by 1 May 2019 warning ‘that if they had an inactive account for the past 6 months, they were at risk of the provisions applying to them’.
Whilst retail funds are working closely with financial advisers in an effort to minimise the negative implications of the change, it is a mammoth task for trustees. Your adviser may not be included in correspondence and may not be aware of every account at risk.
Please ensure you open all correspondence from your superannuation fund. If it is communication to advise that you have an inactive account please contact your financial adviser or FinSec immediately.
If you have an Industry fund/s (e.g. Statewide, REST, Australian Super)
Super trustees of Industry funds were required to write to any affected members by 1 May 2019 warning ‘that if they had an inactive account for the past 6 months, they were at risk of the provisions applying to them’.
Please be aware that Industry funds do not recognise advice relationships and are not working with financial advisers to mitigate the risk of this change. Your adviser will not be notified by industry funds of any client accounts that may be at risk.
Please ensure you open all correspondence from your Industry fund. If it is communication to advise that you have an inactive account please contact your financial adviser or FinSec immediately.
If your cover is cancelled, there is no guarantee it will be re-instated.
Who is affected and what is the implication?
The changes will affect all policy holders (all account types, regardless of balance) with superannuation accounts that are inactive for 16 consecutive months, unless the member contacts the super fund and elects to keep their insurance or makes a contribution to the account.
This is a consumer protection measure under the ‘Protecting Your Super’ reforms, but it could also have the unintended consequence of many Australians being unknowingly under-insured.
For more information on the Protecting Your Super Reforms click here.