You might have received a letter recently about changes to insurance in a super account you have forgotten entirely about. All super funds are required to send you a notice due to changes to insurance in super from 1 July 2019.
Nearly all superannuation accounts have life insurance by default. Life insurance costs money and super funds deduct a fee from your super balance for purchasing this insurance. Many people have ‘lost’ super savings accounts in different super companies from previous jobs. The government is introducing new legislation to protect super savings from being eroded by super fund fees and charges. Along the way, these communications will also remind people about super they might otherwise have forgotten about.
From 1 July 2019, one of the changes requires super funds to cancel the life insurance cover within your super account if it hasn’t received a contribution or rollover for more than 16 months. If you’ve received a letter about this, here are your options and what you need to do.
If you want to keep the life insurance component (and the super fund)
So maybe you haven’t forgotten about this super account and you want to keep it active. To do this, you will need to let your super fund know. If you’ve received a letter from them, there’s likely to be a form attached to return. The other way you can keep your life insurance cover is by making a contribution to your super account to ‘reactivate’ it.
If you want to cancel the life insurance and roll your super balance into another super fund
Consolidating your super into one account will minimise admin fees and charges so they don’t eat into your super savings. You can roll your super into another super fund that you currently use. This means the old super fund and its life insurance component will automatically be cancelled after your super balance is rolled over to your chosen fund.
If you want to cancel the life insurance component (but keep the super account)
The third option is to keep the super account but cancel the life insurance component. Life insurance provides valuable financial protection, but it can eat into your super savings. Think carefully about whether you want to keep the super account with all of its admin fees and charges without an insurance component.
This new legislation requires you to opt-in to keep your insurance cover in super. If you do nothing, the life insurance component of your super account will automatically cancel from 1 July 2019.
It is worth thinking about whether you would be better off consolidating your super accounts into one. The government offers a service to lookup any ‘lost’/forgotten super accounts via either a ‘MyGov’ account where you can also consolidate your super, or you can complete a form via the ATO website to search for any missing super. A link to this form is available on the ‘Resources’ section of our website.
If you need more information or help, be sure to contact your super fund and finalise any paperwork well before 30 June 2019.
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Disclaimer: This post has been prepared for general information purposes only. It is not specific advice to any particular person. You should consult an authorised Align Financial adviser before making financial decisions. Align Financial | Financial Planner Northern Beaches | Servicing North Narrabeen, Narrabeen, Mona Vale, Elanora Heights, Newport, Avalon, Palm Beach | Enquire with us online