Super fund members are ignoring warning letters from their super funds and that could result in the loss of crucial insurance coverage.
Super funds have been contacting members whose insurance cover will be automatically scrapped on July 1 unless they opt to keep it, but only a minority is responding.
QSuper told The New Daily that only 15 per cent of affected members have bothered to get in touch, while a spokesperson for a separate fund said “it’s been a tough slog” getting responses.
AustralianSuper, the country’s largest fund, reported that only 6 per cent of the 220,000 affected members (13,200 people) have so far contacted the fund.
Richard Lamb, AustralianSuper’s insurance head, was pleased to see even that level of engagement, noting that it was much higher than other events of a comparable nature”.
“The rule of thumb is a response rate of around 1 per cent,” he said.
However, it still means that a lot of affected members are not responding to the situation.
Protecting Your Super
The threat to insurance comes with new legislation known as Protecting Your Super that passed in February. It will reverse the onus on members with inactive accounts to maintain life and disability cover attached to their super accounts.
Till now, insurance has been attached to all super accounts unless members opt out.
But driven by concerns that funds are being eroded by unnecessary insurance fees, the onus will switch to opt-in from July 1 for accounts not touched for 16 months.
Those contacted by their fund need to get on the front foot, said Industry Super Australia CEO Bernie Dean.
“This is one of those times people really need to think about their super and not throw the letter from their fund straight in the bin, or mark the email as spam. If you’re worried or don’t know if you’ll be affected give your super fund a call, ” he said.
Low balances also at risk
Another cohort of members could also face losing their insurance cover. These are people with less than $6000 in a fund which has not received contributions for 16 months.
Those funds will be hoovered up by the Australian Taxation Office and held in a special account till the member chooses to do something else with it.
Consolidating these small accounts will see related insurance policies dropped.
Many of these small accounts could be held by young people who have multiple accounts as a result of working in a range of jobs and are being seriously eroded by fees and insurance charges.
However, some could be funds owned by members who are out of the workforce but need the insurance to remain.
Mr Dean warned that while many people will benefit from the consolidation of funds, losing insurance cover could be dangerous.
“There are some real positives for people in these changes and we expect to see significant boosts to super balances as multiple accounts are consolidated and insurance on those old accounts cancelled.”
“It’s often the case with good things that there are a few catches people should be aware of – especially the mums or others out there who might have been out of the paid workforce for a while and haven’t had any super contributions.”
Such people could be caught out badly if they need insurance that has, unbeknownst to them, been dropped.
In another move that will help those with low balances, fees on accounts worth $6000 or less will be capped at a maximum of 3 per cent from the first of July.
The New Daily is owned by Industry Super Holdings