Superannuation funds are not doing enough to communicate to their members the impact that new laws may have on their funds.
As part of the governments Protecting Your Superannuation Package reforms, a super fund member’s life insurance will be cancelled if their account is inactive, unless they retain the insurance.
Integrity Life’s general manager of distribution Suzie Brown said while super funds had to notify people of the changes many members were not acting fast enough.
“Despite the fact that super funds have communicated with people about the changes, the tight time frame means that there isn’t much time for people to opt-in to insurance. That is, to let their fund know that they want to keep their life insurance cover,” said Ms Brown.
While some funds may reinstate lost cover, members will be required to reapply for their life insurance and this may mean they have to provide updated health and lifestyle
If circumstances have changed since they opened their account members may not be eligible for the same cover they once had.
Ms Brown said that funds needed to do more to get their members to make deliberate decisions
“There are Australians who may not be aware of how the upcoming changes to life insurance within super will affect them and their ability to financially protect themselves or their loved ones when they need it most,” she said.
While the rules only apply to inactive accounts, that is accounts that haven’t had a contribution in the past 16 months Ms Brown said it was still important for all members to check their accounts and make decisions.
“If you are unsure how much insurance you might need should you experience a major health incident, or worse, it can be a good idea to seek professional advice, either through your super fund or from a professional risk adviser,” she said.
The ATO will also get new powers when the rules changes which will allow the taxation office to consolidate accounts with a balance below $6,000.
Most funds are already transferring inactive accounts to an eligible rollover fund to facilitate early consolidation but the impact of the legislation will be felt in FY20.
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