Retirement
Do you have insurance in super? The rules are changing from 1 July
Savvy younger Australians are using their superannuation to cost-effectively insure themselves, but those with low balances need to act before 1 July to protect their cover.
Do you have insurance in super? The rules are changing from 1 July
Savvy younger Australians are using their superannuation to cost-effectively insure themselves, but those with low balances need to act before 1 July to protect their cover.
Superannuation policies offer members the potential benefit of life insurance, should they wish to have it included as part of their package.
However, new government regulations that come in from 1 July 2019 are removing this benefit if a superannuation account is inactive for a 16-month period - meaning it's had no contributions.
Given life insurance through superannuation is just shy of 70 per of Australians’ life insurance, the pending changes could have profound impact on unsuspecting Australians, NGS Super warned.
Laura Wright, CEO of NGS Super, believes it’s a big risk for even young Australians to not protect their future in case an unfortunate incident happens.
“Young people are highly vulnerable to workplace accidents and potentially total and permanent disability. So I think people really underestimate the value of having [life insurance],” said Ms Wright.
While the government is changing the regulations around superannuation in an effort to protect low balances, NGS super disagrees with the extent that fees are having on balances.
Instead, they suggest it helps clean up an industry that has not looked after itself.
“Quite clearly, the industry has taken a long time to come to grips with the need to clean up multiple accounts. Perhaps, if we as an industry had applied our minds to that earlier, the government wouldn’t have stepped in,” said Ms Wright.
“I personally think that insurance is a huge benefit. At the younger ages, it is incredibly cheap in most funds, so it is not as though it’s going to impinge as much as what is perhaps said in some of the illustrations that are used to show the erosions of balances,” said Ms Wright.
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