21 Nov 2019
It's time to check your super
Learn more about the latest super reforms and what they could mean for you and your family.
Putting Members’ Interests First legislation
Putting Members’ Interests First (PMIF) law was passed in September 2019. It aims to prevent certain people being charged for insurance inside their super that they may not need.
The PMIF law affects:
- members with a super balance under $6,000
- new members aged under 25
People with a super balance under $6,000
Under the new PMIF laws, super providers will check the balance of all super accounts with insurance on 1 November 2019.
Where an account balance is below $6,000 (and no exemptions apply), the super fund must let the member know their insurance will be cancelled, unless:
- the balance reaches $6,000 before 1 April 2020, or
- the member requests to keep their insurance.
People under 25
From 1 April 2020, super funds must not provide insurance inside super to new members aged under 25 – unless the member requests it.
Heard from us about having your insurance cancelled already?
We previously let our members know their insurance could be cancelled because of government changes under Protecting Your Super (PYS) law. PYS involves cancelling insurance for inactive accounts, whereas PMIF involves cancelling insurance for low balance accounts and young members.
Protecting Your Super legislation
Effective from 1 July 2019
The Protecting Your Super (PYS) Package aims to protect super balances becoming diminished by fees and insurance premiums in inactive super accounts.
The PYS laws are different to the Putting Members’ Interests First changes. PMIF laws focus on super account balances below $6000 and people aged under 25 (see details above).
There are four main areas of the PYS legislation:
1. Insurance cancelled for inactive super accounts
Super providers must cancel the insurance inside inactive super accounts. Generally, an account becomes inactive if it hasn’t received a contribution or rollover in the previous 16 months. Before cancelling, affected members must be told their insurance may be cancelled and given the opportunity to keep it.
Members can stop their insurance being cancelled by:
- letting their super provider know they’d like to keep it, or
- making a super contribution or rollover (of any amount) into the inactive account.
Making regular contributions can prevent an account becoming inactive in the future.
2. Inactive super accounts with low balances will be closed
Many inactive accounts with a balance below $6,000 will be closed, and the balance transferred to the Australian Tax Office. Where possible, the ATO will then connect this super money with an active account for each member.
Exceptions apply, including if you have insurance or you ask for your account not to be sent to the ATO.
3. Cap on fees for accounts with low balances
Fees are capped at 3% p.a. for accounts with balances under $6,000 as at 30 June of each year.
If an account with less than $6,000 is closed before 30 June, the 3% cap applies on a pro-rata basis.
4. Switch funds without paying an exit fee
Exit fees are banned. This move is welcomed and represents an opportunity to review older style arrangements against that of the broader market without incurring an exit fee.
Exit fees also won’t apply where money is withdrawn, and the account closed.
It is important to ensure that you check in with your financial adviser to ensure that your existing plans are not impacted by these legislative changes
Is it time to check your super?
©AMP Life Limited. First published 10 October 2019