Earlier in the year we announced the changes to insurance in super that took place from 1 July 2019. They formed part of the government’s ‘Protecting Your Super’ (PYS) package which aims to protect super savings from being eroded by fees and charges. New legislation recently passed in September 2019 introduce new changes to insurance in super from 1 April 2020.
A second set of legislation changes, ‘Putting Members’ Interests First’ (PMIF), takes effect from 1 April 2020 but will need to be actioned before this date. They are being introduced by the government as an addition to the PYSP legislation to help protect super savings.
The PMIF changes impact new super fund members, those who have a low balance of less than $6,000, or members under 25 years of age. If you fall into one of these categories, your super fund will be forced to cancel the insurance cover in your super on 1 April 2020, unless you tell them otherwise.
If you have insurance in your super fund, we encourage you to think carefully about whether your insurance cover is right for you. Insurance provides valuable financial protection, however, your insurance premiums will be deducted from your account and may reduce your super savings.
Super funds (other than SMSFs) are required to communicate the PMIF changes if you’re impacted and give you the option to keep the insurance if you wish to do so. You should receive a letter from your super fund if this affects you and you will have the following options:
To keep the insurance component in your super account
If you wish to keep the insurance component, you will need to do one of the following:
- Opt-in to keep your insurance by completing a form which your super fund should provide you;
- Ensure your super balance reaches $6,000 or above on any day before 1 April 2020;
- Request your employer to make additional contributions (covering any fees or deductions before 1 April 2020) to increase your account balance to $6,000 or more
To cancel the insurance component in your super account
You don’t need to do anything if you wish to cancel the insurance in your super account. On 1 April 2020, your super fund will automatically cancel the insurance, provided your balance remains below $6,000.
We recommend seeking financial advice if you are unsure about whether to keep your insurance.
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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.
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