New Protecting Your Super law effective 1 July 2019: Does this affect me?

New legislation known as 'Protecting Your Super' was passed in March and comes into effect 1 July 2019. The new law potentially affects anyone with Life, TPD or Income Protection insurance via industry superannuation funds like First State Super, HESTA and Australian Super, or retail public-offer funds (referred to as ‘Choice’ funds) and MySuper accounts.

If you do not have insurances via one of these superannuation funds, you can stop reading now. If you do have insurances via one of these funds, here’s a brief snapshot of what you should know to avoid your insurances being cancelled.

WHY: People who have acquired comprehensive personal insurances via an adviser are more-often well informed about what insurances they have and how much these are costing them. More commonly people ‘inherit’ a basic insurance benefit as part of their industry or retail choice super fund, the cost of which may be less transparent. This is often replicated over multiple super funds and eats away at people’s retirement savings.

WHAT: The new legislation is intended to relieve these issues by mandating the cancellation of any insurances held by one of these accounts where no contributions or rollovers have been received by the fund for 16 months. If you or your employer actively contribute to the fund, the insurances will not be cancelled. If not, you must either:

1. Make a contribution or rollover into the fund to maintain your insurances, or alternatively

2. Notify the fund that you wish to ‘opt-in’ for insurance purposes, despite no active contributions.

WHAT NEXT: If you have an inactive superannuation fund, the fund should write to you to advise you of these options and provide you with ‘opt-in’ instructions. This can often be done very easily online. If you wish to retain these insurances, you should contact your fund/s and ‘opt-in’ to ensure they are not cancelled.

WHAT ELSE: While the insurance cover within these group and industry super funds is often very basic and no longer ‘cheap’, some people may have difficulty securing comprehensive insurance without an exclusion or higher premium loading. In extreme cases, this may be the only insurance available to some people. In some cases, for a variety of reasons, people may have both comprehensive insurances as well as some basic cover via these funds. All of these people should take active measures to ensure that these insurances are not cancelled without their knowledge.

This legislation does not affect cover held through your Self-Managed Super Fund (SMSF).

As always this is a general guide only and is not intended as specific advice to you. If you would like to discuss these issues further and whether you may be affected please do not hesitate to contact us directly.