From July 1 new rules come into place that may effect your super fund.
The changes are designed to protect the balances of superannuation accounts for members.
Let’s say there has been no contribution to your fund for a period of 6 months or more, it will now be deemed as ‘inactive’.
If a super fund remains ‘inactive’ for 16 months, the super fund trustee will now be required to cancel any insurance cover held within that account.
What’s the Issue?
Whilst this has the benefit of minimising expenses for those super fund policies that are forgotten about (and there are many), the unintended consequence is that those people that have held a super fund solely for the benefit of having their life insurance remain with that fund are now at risk of having it automatically cancelled.
What are some examples?
You’ve left an employer who was making contributions to an employer fund.
This may include employment at a large company for example, and their employer provided group insurance rates within the super fund.
Upon exiting employment or making their own choice of super fund, the employer fund was retained with a low balance purely to take advantage of a low-cost alternative insurance policy, or the person’s health has deteriorated since that original super fund was established, and it may now be difficult to obtain new cover.
You have a self managed super fund and holds an inactive super fund just for insurance cover.
This week I watched Ross Greenwood talk of his own example whereby he had his own Self Managed Super Fund (SMSF) for his investments, but left his insurance in a seperate super fund as it was a lower cost than he could obtain himself.
As a result, Ross has written to his super fund advising them that he wished to retain the super fund life insurance and opt-in to staying with the fund even though it could be classified now as inactive.
Sole business owners that make irregular contributions to their own fund.
With inconsistent cashflow, business owners can sometimes make deposits into their super fund at different stages of the year/s. This may potentially render their super fund inactive and lose their insurance automatically.
Your insurance cover could be cancelled
For cover to remain in place from 1 July 2019, for any dormant type super funds, members will need to either opt-in by contacting the super fund or alternatively make a contribution/rollover to the account.
What if no action is taken?
If the fund remains ‘inactive’ as of July 1 2019, the insurance cover will be cancelled from the paid-to date.
This means that the member will no longer be covered or be able to claim any benefits from that paid to date.
Reach out to us via phone (02) 8539-7233 or email firstname.lastname@example.org if you have concerns at all and we will assist to discuss your options.