Protecting Your Super Legislation Australia

The “protecting your super” legislation is aimed at protecting people’s super with adjustments to insurance in super, fees, and lost member accounts. Insurance inside super may be cancelled if you don’t opt in to keep it. Make sure you’re up to date on the situation and know what you should do if you’re affected. 

The Treasury Laws Amendment Bill 2019, also referred to as the “Protecting Your Superannuation Package” 2019 received Royal Assent earlier this year. The law introduces a number of initiatives to protect individuals’ retirement savings. 

I think most of these things in super legislation are great initiatives, but I’m worried about the consequences of the lapsed insurance and want to bring your attention to it.

Some of the good initiatives in this super legislation are: rolling ATO-held inactive accounts with small balances into active accounts; a maximum fee cap of 3% on small balances; and banning exit fees.

The part that concerns me in this super legislation is the cessation of insurance cover on inactive accounts. What this means is that if you haven’t contributed to super in the past 16 months, from July 1 you will no longer have insurance… Unless you notify your super fund in writing or through their opt-in process,

This super legislation concerns me because, in general, Australians, particularly young Australians, are not engaged with their super fund beyond perhaps knowing the fund’s name. Over the years, I have come across several occasions where someone has died unexpectedly and the only reason the family was financially able to survive was because the deceased had half a dozen super funds with default life insurance. This won’t be the situation moving forward.

Based on this super legislation, if your insurance is cancelled, you may not be able to obtain new cover. What you may do is to have a search on some finance-related Facebook groups for the stories of people who rolled their supers into a new fund without considering insurance and now don’t have any or have exclusions or loadings due to health conditions, maybe your BMI, maybe a full decline due to diabetes or depression or change of occupation or past times.

This is why I think this is so important and want to bring your attention to it. 

If you have been on maternity leave or home duties raising a family,

If you are self-employed and haven’t been contributing to super,

If you’ve been unemployed, injured or unwell and have not had any contributions to super,

If your employer hasn’t been contributing to your super, It happens.

Super funds have been sending letters, text messages, and emails. If you’ve been contacted by your super fund, it’s probably for a reason; it’s too early for end of financial year statements.

I’m looking after my clients, but I also want to make sure others in the community are aware and have opened the letter from their super fund, and do what they need to do to keep their insurance.

If you don’t think you need insurance cover, ask the people that would be affected by your death. If you are on home duties, the cost of a nanny, cleaner, driver, or educator in your absence isn’t cheap. If you are the sole income earner, how would you feed your family if you were injured and couldn’t work?

If you have a mortgage, how would your family financially survive and maintain the lifestyle you’ve worked so hard to provide for them? It’s your call at the end of the day.

I can see the good intention of this super legislation to protect the retirement balances of Australians, but there are likely to be huge negative consequences for many people.

If you think you may not have had super contributions since February 2018 or have been keeping a second super fund open just to hold insurance, it wouldn’t be a bad idea to confirm whether you need to act to maintain your insurance cover.