A number of superannuation legislative changes were announced between 2019 and 2021, including in the 2020-21 budget. The 2020-2021 changes see the introduction of the “Super Reforms – Your Future, Your Super” measures which start to come into effect this year. The earlier changes were referred to as “Protecting Your Super” (PYS) and “Putting Member’s Interests First” (PMIF). In this article, we look at the impact of these new measures on working Australians’ superannuation accounts.
1. Your Future, Your Super
The changes can be split into 3 major groups of changes.
a) The “super stapling” change
This is possibly the most significant change and it will come into effect after 1 November 2021.The change is designed to stop duplicate accounts, which can lead to duplicate insurance and administration fees and charges.
In summary, the changes will mean that if you do not choose a super fund when you start a new job, your employer may have to check with the ATO and ask if you have an existing account from a previous job. This is different to the current process which allows employers to automatically pay your contributions into a new account of their choice if they do not have your existing (or your chosen) superannuation details.
This new process is being called “super stapling” and will mean that you have a “stapled super fund”, which will follow you through various jobs.
A new comparison tool called YourSuper will be set up. The tool is designed to allow you to compare key features/data on MySuper superannuation products to make it easier for you choose the right superannuation fund.
Under this change, super fund performance will be measured and data will be accessible online.
We have some concerns that people will decide to change super funds based on the comparisons produced by this new tool alone. This could have an impact on their existing insurance.
In other words, people could lose the full benefit of their insurance cover or they could have pre-existing condition exclusions placed on new insurance cover that they get, if they change their superannuation fund without understanding the full implications of doing so.
c) Fund performance data to be published on the ATO website
A new assessment of super fund performance will be completed by the Australian Prudential Regulation Authority (APRA) and published on the ATO website.
It details those super funds that are underperforming and is aimed at helping people to make informed decisions about which super funds to join based on investment performance and fees.
As with the YourSuper tool, we have some concerns that people will make a decision to change their super based on this data alone, which could result in inadvertent impacts on their insurance coverage.
2. The Putting Member’s Interests First (PMIF) changes
The PMIF changes to superannuation came into place on various dates in 2019 and apply to MySuper members.
The main features of the changes are set out below.
From 1 April 2020, your super fund was required to “switch off” your insurance coverage, if you were a member of a super fund and:
- had an account balance of less than $6,000 (even if you are actively making contributions); and/or
- you were aged under 25 years; and
- have not made an election to have insurance in your super.
This change has the potential to impact insurance coverage for;
- death and terminal illness;
- Total and Permanent Disability/TPD benefits; and
- income protection/salary continuance.
There were notice requirements imposed on super fund trustees, which were as follows:
Trustees were required to write to all members with an account balance of less than $6,000 before 1 December 2019 to let them know that if they take no action or make no election, their superannuation-based insurance would cease from 1 April 2020.
If the Trustee has failed to notify of the cancellation and you have lost the right to make the necessary election to keep the cover, you may be able to claim on your policy or against your super fund on the basis that you were not notified of the cancellation.
3. The Protecting Your Super (PYS) changes
The PYS changes were also designed to protect MySuper superannuation fund members’ retirement savings. The changes came into effect on 1 July 2019.
On and from 1 July 2019, all super funds were required to “turn off” all insurance which was in place for super fund members with “inactive” superannuation accounts.
An account is “inactive” if it has not received an employer or personal superannuation contribution for 16 consecutive months.
This means that on 1 July 2019, all members with “inactive” super accounts lost their insurance unless they made an election that their cover is to continue. Also, from this time onwards, insurance cover on “inactive” accounts stops after 16 consecutive months of not receiving a contribution (unless an election is made to keep the cover).
As with the Putting Member’s Interest First changes, the legislation mandated notice requirements (which continue to apply). In summary, those requirements were that a super fund must send a notice, before 1 May 2019, to “inactive” members advising that:
- after 1 July 2019, a benefit won’t be provided to them if their account has been inactive for a continuous period of 16 months, and they haven’t elected to maintain their insurance cover; and they must
- set out in writing how the member can elect to maintain their cover.
Also, super funds have an ongoing obligation to advise you if they “switch off” your insurance due to the account being inactive, in advance of taking that step.
Should you have received a notice but you didn’t?
Many people missed out on receiving notices under the above changes. Generally, we have seen that these notices were not received where members had not updated their address when they moved house.
Importantly, it is the member’s responsibility to keep their address details updated and, if you did not receive a notice because you did not update your address or listed email as your preferred method of communication, you may have lost your insurance cover without knowing.
Those people that have unknowingly lost their insurance cover can usually apply to have it reinstated but are unlikely to be eligible to make claims relating to the period when their insurance was lapsed. Also, they may not get cover for existing medical conditions.
People who did not get a notice because the fund failed to send one or sent it to the wrong address may still be able to elect to keep their cover or claim for illness or injuries which happened during the time that they didn’t have cover.
If a mistake was made by the fund and you were not told that your insurance cover was stopped, you may be able to take steps to have it reinstated and even claim a benefit if you got sick when the cover was wrongly cancelled.
If you lost your insurance cover and would like some guidance on having it reinstated or claiming TPD or income protection benefits, please get in touch for some free advice.
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