MySuper is a set of legislative reforms which came into force in 2013. The reforms were aimed at protecting the superannuation accounts of those employees who had not selected a super fund and had been “defaulted” into a superannuation account by their employer.
We call such people, default or MySuper members. Most Australian workers are default or MySuper members, and so the reach of the MySuper reforms affects millions of people in Australia.
How do the MySuper reforms work?
Prior to 2013, there were surprisingly few restrictions on the super fund that an employer was able to choose on a worker’s behalf if they did not select an account themselves.
Many workers would simply choose the industry fund which was relevant to their industry. For example, an employer in the construction field might choose Constructions and Building Union Superannuation (CBUS), or a legal employer might choose LegalSuper. Other employers might have chosen accounts based on the advice of a financial advisor.
The MySuper reforms made this process of choosing a fund easier for employers and gave greater protection to workers by making sure that they got good value for money, irrespective of which superannuation account their employer chose for them.
In summary, the MySuper reforms required all superannuation funds to establish investment products which complied with a number of requirements relating to:
- the fees which can be charged;
- the investments which can be entered into; and
- the insurance products which can be purchased;
for MySuper superannuation accounts holders.
MySuper and insurance
Perhaps the most important reform in the MySuper changes is the requirement that all Total and Permanent Disability (TPD) insurance benefits which are held in super for default or MySuper member accounts, must include a definition of TPD which is consistent with the definition of Permanent Incapacity in the superannuation regulations.
The definition of Permanent Incapacity is that:
A member's ill-health (whether physical or mental) makes it unlikely that the member will engage in gainful employment for which the member is reasonably qualified by education, training or experience.
In other words, the definition of TPD must be a work-based definition which is usually easier for a worker to satisfy and be paid a benefit, compared to a definition which requires an inability to complete the Activities of Daily Living or a loss of limb definition.
This is an important reform, as it aims to ensure that all default superannuation fund members have insurance which is on fair terms and is free from loop-holes which exclude sick and injured people from claiming.
Some unfair TPD insurance terms still remain
However, even the MySuper reforms have not been successful in eliminating all unfair TPD insurance terms and loop-holes. Some superannuation funds are still offering unfair policy terms to default or MySuper members.
Further, the MySuper reforms do not apply to you if you did not join the superannuation fund as a default member or you have created your own self-managed super fund (or SMSF).
If you have claimed a TPD benefit and are having trouble because your superannuation fund is relying on an unfair or limited TPD definition, you can give us a call and we will give you some free advice about the superannuation fund or insurance company’s actions.