From 1 July this year, superannuation funds will be required to cancel insurance cover within accounts if the account is deemed to be inactive.
This is a consumer protection measure under the Protecting Your Super reforms, but it could also have the unintended consequence of Australians losing out on insurance policies they thought they held.
The changes will affect accounts that are inactive for 16 consecutive months, unless the member contacts the super fund and elects to keep their insurance or make a contribution to the account.
Steps you should take
Slater and Gordon’s superannuation principal lawyer, Annemarie Gambera, said all super holders need to be informed so they can take appropriate action.
“This is especially the case for anyone with multiple super accounts. An account is inactive if it has received no financial contributions for 16 months or more,” said Ms Gambera.
“We are advising clients to be aware of the upcoming changes and to ensure they understand that the super insurance policies in each of their accounts might offer different benefits, so it’s best to check what qualifications and criteria they’ll need to meet to access the insurance,” said Ms Gambera.
Slater and Gordon’s superannuation senior associate, James Hunter, believes the consequences could be catastrophic if the holder of the account becomes injured, ill or loses income from not being able to work.
Other changes in the works
Part of the new scheme includes plans to cap fees to 3 per cent for account balances that are less than $6,000 dollars, in an effort to stop them being eroded by high fees.
“It’s important that people get in touch with their super fund, understand their rights and check if their working situation still allows them to meet the criteria and requirements to receive the insurance provided by their fund,” Mr Hunter said.
“Make sure that if you are employed, your super fund is receiving regular contributions and that you are across what the insurance provided by your fund actually offers you,” Mr Hunter said.
Cameron Micallef is a journalist at Nest Egg, writing primarily about personal wealth and economic markets.
Prior to this, Cameron worked for Australian Associated Press. He graduated from the University of Wollongong with a double degree in communications and commerce.