By Peter Kelly on May 15, 2019 1:51:02 PM
In May 2019, superannuation fund trustees started writing to selected members of their funds informing them the insurance cover held in their super account may be cancelled. This can have serious consequences for fund members if not addressed promptly.
The action being taken by the super funds is as a consequence of legislation that was passed by the Parliament in February 2019.
Where an individual has a superannuation account, and contributions or rollovers have not been received in the previous 16 months, the account is treated as being inactive.
The February legislation now requires that superannuation fund trustees cancel the insurance cover held in inactive accounts, unless the member has elected to retain the insurance.
What does this mean?
Super fund trustees were required to conduct a review of all members of their fund as at 1 April 2019, and identify those members that had not made contributions or arranged for other super benefits to be rolled into their account, in the previous six months. That is, contributions had not been received since 1 October 2018.
Where accounts identified in the review include insurance, the super fund was required to write to each member informing them that the insurance cover would be cancelled once a period of 16 months of inactivity has elapsed. Cancellations are to commence from 1 July 2019.
In order to retain the insurance cover, a number of options exist. You can:
- Make a contribution or arrange for other super benefits to be rolled over to the account before the 16-month period elapses; or
- Write to the super fund informing them that the insurance is to be retained.
If you have received a letter from your super fund informing you that your account has not received contributions or rollovers within the past six months, there is a risk that your insurance may be cancelled as early as 1 July 2019.
Your need to take the following steps:
1. Review your insurance cover to determine if you still need the cover,
2. If you do, then either:
- make a contribution to your super fund, arrange for other super benefits to be rolled over to your account, or
- make an election, in the form provided by your super fund, indicating that you wish to retain your insurance cover.
Better still, contact a licensed financial adviser and arrange to have a formal review of your insurances carried out.
If you receive a letter from your super fund advising that your account is likely to become inactive, don’t ignore the letter. If insurance cover is cancelled, it may be difficult to replace the cover where it is needed.