“Protecting your Super” came into play as of July 1, 2019, if you are affected by this legislation you should have received a letter that requires your action and attention.  The purpose of the legislation is to protect super funds from being depleted due to unnecessary fees and costs.

However, “Protecting Your Super” legislation will also see insurance policies held within inactive superannuation accounts cancelled. Again, this is designed to prevent superannuation accounts from being reduced by ongoing insurance premiums and super funds will be required to cancel some members’ insurance benefits. The trigger event for insurance policies held within a fund is the fund becoming inactive, by not receiving any contributions or rollovers in the previous 16 months. At that point in time, the superannuation provider would be required to cancel the insurance held within the fund, and they will send you a warning letter.

If the superannuation account balance is below $6,000, it would be transferred to the ATO and held on your behalf with zero fees.

In theory, this sounds okay, we can see what the Government is trying to achieve. That being to protect people’s superannuation money and the accounts they may have forgotten about, which let’s face it is quite common.

However, what is a common occurrence may present a very real problem. Many people have kept old superannuation accounts open, purely for the purpose of retaining insurance. They may be unable to obtain insurance on the same terms elsewhere, so they have intentionally kept that account open. We see it all the time, sometimes its recommended.

Therefore, what are your options?

If the above applies to you, there’s a fair chance you will want to retain the insurance, so it is very important that you are aware that you have the ability to opt-in!

If you are an existing insurance client of Hewison Private Wealth, we would be across this and communicate with you any actions that need to be taken.

Regardless, we encourage you to take note of any correspondence you may receive with regard to this. There’s no doubt it’s easy to gloss over mail from your super fund, but in this scenario, taking no action could lead to loss of insurance.

Now maybe a very opportune time to ensure your wealth protection arrangements are reviewed.

What if you don’t want your account transferred to the ATO?

Here’s what you can do:

– combine superannuation accounts so that the balance of the smaller fund is now more than $6,000

– make a contribution to the account (assuming you qualify to do so)

– change your insurance, or

– nominate a binding beneficiary for your super account (if not done already).

If you have any questions about this legislation and identify whether you may be impacted by these new superannuation rules, contact our inhouse expert Marcus English here