Up to a third of Australians risk losing valuable death and disability insurance when controversial super law changes begin on July 1.
The Protecting Your Super bill (which passed Parliament on February 18) will see insurance policies switched off in any superannuation accounts that have been inactive for 16 months, placing new parents or those taking an extended break from work at greatest risk.
Anyone with a super account who hasn’t received a contribution within the allotted time will need to contact their fund and specifically request for it to be kept.
But a worrying new report from data research firm, YouGov, found more than half of Australians aren’t even aware of the changes.
Three million could be affected
Industry Super Australia (ISA) chief executive Bernie Dean said the changes will bring “real positives” for many super members, especially for those unintentionally paying for multiple policies they are unlikely to claim on.
But Mr Dean cautioned there are some things people also need to look out for before the changes take effect.
“If you haven’t contributed to your super account in 16 months, you could be at risk of your account becoming inactive and, in turn, losing your insurance cover,” he said.
“This may happen to people who take a long period of leave off work, such as a new parent looking after their newborn, or if you’ve taken time off to study or go travelling.”
Women have also historically been left with lower super balances as a result of leaving the workforce to become their child’s primary caregiver.
Association of Superannuation Funds of Australia (ASFA) chief executive Dr Martin Fahy agreed, and encouraged all members to double check their current insurance arrangements.
“The intent of the legislation was not to have fees eroding balances unintentionally, but what we do know is that about four in 10 – 38 per cent – have a super account that hasn’t received any contribution in the last 16 months, and we know more than half of the people we spoke to didn’t know about the changes to the cover provided,” he said.
“We want to avoid people being left high and dry, and that disaster situation where they lose their cover inadvertently and leave their loved ones without financial support in the event of a tragedy.”
ASFA also collaborated with the Financial Services Council (the peak body representing bank-owned and for-profit super funds) to launch timetocheck.com.au – an online resource to help members navigate the changes and make an informed choice about their insurance coverage.
“Take some time out for some life admin and get onto the site, learn about the changes and make a conscious choice,” Dr Fahy said.
Talk it through
Only one in four super fund members will read every piece of correspondence sent to them by their fund, Dr Fahy said, leaving many out of the loop when it comes to changes affecting their retirement savings.
As a result, some people may not have heard from their fund despite a big push from the funds themselves to inform members of the changes and what they can do to manage their insurance options.
“We want people to open that communication and act on it,” he said.
“Don’t feel guilty if you’ve moved house and haven’t told your fund, or you can’t remember your fund, those funds still want to hear from you and now is a good time to contact them. This is about getting it right because the consequences are too disastrous.”
Mr Dean said now is “one of those times when you shouldn’t throw the letter from your super fund straight into the bin” and anyone who is unsure what will happen to their coverage after July 1 should reach out to their fund as soon as possible.
The New Daily is owned by Industry Super Holdings