Retirement
Should I hold life insurance in my superannuation?
Holding life insurance through superannuation is a common strategy as it is often the most inexpensive way to take out this insurance, but is it the right solution for you?
Should I hold life insurance in my superannuation?
Holding life insurance through superannuation is a common strategy as it is often the most inexpensive way to take out this insurance, but is it the right solution for you?
The changes proposed by the government to superannuation (although yet to be legislated) could impact on the ability for some Australians to hold life insurance in super.
One such change is the proposed reduction in the concessional superannuation contributions cap for all individuals, down to $25,000 a year from July 1, 2017.
This could limit the amount people can provide for their retirement. As a result, they could decide that it no longer makes sense to pay premiums for life insurance out of their superannuation balance.
As an example, Felix is under 50 and has been contributing $30,000 to superannuation each year.
He has structured his life insurance through his superannuation fund, paying premiums of $5,000 a year.
Felix is on the top marginal tax rate of 49 percent which includes Medicare Levy and Temporary Budget Repair Levy for the 2017/2018 financial year.
If the superannuation changes are legislated, Felix will only be able to contribute $25,000 per annum from July 1, 2017. These contributions will be further eroded by the insurance premiums he will pay inside his superannuation fund.
Key is that life insurance premiums inside superannuation are deductible to the fund at the rate of 15 percent a year. But life insurance premiums outside of superannuation are not tax deductible to an individual.
If Felix were to transfer the policy outside super, he would need to allocate an additional $10,000 of his income to fund the premium.
If he deducted this from his annual super contribution, this would leave only $15,000 to go toward super.
After tax, this would only amount to $12,750 a year going into super.
If, however, he were to leave the policy inside his superannuation fund his member balance would increase by $17,000 a year.
Everybody’s situation is different so it’s important to get advice before making any changes to superannuation and life insurance approaches.
Peter Speechley, wealth management and superannuation partner, HLB Mann Judd Perth
Superannuation
Early super payments slow to under $200m
Less than $200 million was paid out of the super system in the second week of October, as the popularity of the government’s early release scheme looks to be slowing further following the release of...Read more
Superannuation
‘Impressive’ super erases most COVID-19 losses
Australian superannuation has erased most of the COVID-19 downturn following a positive September quarter, new research has shown. ...Read more
Superannuation
1.2m Australians lose in tax offset lag
The Treasury’s latest tax cuts will see more than 1.2 million low-income earners paying a higher rate of tax on their superannuation contributions, with funds arguing changing the tax rate could add...Read more
Superannuation
Could you be stuck in a poor-performing fund?
The government’s superannuation reforms to eliminate multiple superannuation accounts could have unintended consequences, with older Australians locked into financial decisions made by their teenage...Read more
Superannuation
Big super pushes for gender parity
One of Australia’s largest superannuation funds has launched an investor-led initiative that will see women fill at least 40 per cent of the executive roles in the ASX 200 over the next decade. ...Read more
Superannuation
Why it is ‘cruel’ and ‘embarrassing’ not to raise the SG
Australian workers, who are bearing the brunt of the public decision to shut down the economy, could be “cruelly rewarded” for their sacrifice with a less dignified retirement, industry experts ...Read more
Superannuation
A short-term fix: Lack of strategy behind super withdrawals
A large proportion of Australians who have withdrawn their super early as a result of financial hardship have not even stopped to consider how it will impact their savings at retirement. ...Read more
Superannuation
3 best and worst super funds revealed
Members are paying almost $35 billion in superannuation fees every year, according to a new report which has named the best and worst-performing funds. ...Read more
Superannuation
Early super payments slow to under $200m
Less than $200 million was paid out of the super system in the second week of October, as the popularity of the government’s early release scheme looks to be slowing further following the release of...Read more
Superannuation
‘Impressive’ super erases most COVID-19 losses
Australian superannuation has erased most of the COVID-19 downturn following a positive September quarter, new research has shown. ...Read more
Superannuation
1.2m Australians lose in tax offset lag
The Treasury’s latest tax cuts will see more than 1.2 million low-income earners paying a higher rate of tax on their superannuation contributions, with funds arguing changing the tax rate could add...Read more
Superannuation
Could you be stuck in a poor-performing fund?
The government’s superannuation reforms to eliminate multiple superannuation accounts could have unintended consequences, with older Australians locked into financial decisions made by their teenage...Read more
Superannuation
Big super pushes for gender parity
One of Australia’s largest superannuation funds has launched an investor-led initiative that will see women fill at least 40 per cent of the executive roles in the ASX 200 over the next decade. ...Read more
Superannuation
Why it is ‘cruel’ and ‘embarrassing’ not to raise the SG
Australian workers, who are bearing the brunt of the public decision to shut down the economy, could be “cruelly rewarded” for their sacrifice with a less dignified retirement, industry experts ...Read more
Superannuation
A short-term fix: Lack of strategy behind super withdrawals
A large proportion of Australians who have withdrawn their super early as a result of financial hardship have not even stopped to consider how it will impact their savings at retirement. ...Read more
Superannuation
3 best and worst super funds revealed
Members are paying almost $35 billion in superannuation fees every year, according to a new report which has named the best and worst-performing funds. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
