Saturday, 10 December 2011

Insurance in superannuation - what is about to change?


http://www.moneymanagement.com.au

Insurance in superannuation - what is about to change?

Following the Government’s release of the Stronger Super information pack, Jeffrey Scott outlines some of the major changes about to happen with respect to insurance within superannuation.
On 21 September 2011, Assistant Treasurer and Minister for Financial Services and Superannuation, Bill Shorten, issued the Stronger Super Information Pack 1. The Government addressed a number of issues regarding life insurance inside super.
It has been proposed that MySuper products will be required to offer life and total and permanent disability (TPD) insurance to all members on an opt-out basis, and members of MySuper products will be able to increase or decrease their insurance cover (if offered by the trustee) without having to leave the MySuper product.
There may be particular factors from a workplace perspective which influence the appropriate level and structure of insurance for employees.
Therefore, within a MySuper product, it will be possible for the insurance cover to be tailored for a particular employer for the benefit of its specific workforce. Given the standardisation of most other aspects of MySuper products, insurance will become a key differentiator.

Automatic consolidation

Automatic consolidation of superannuation accounts may pose the risk that in certain cases, where a member is funding insurance premiums from an inactive account, they may stand to lose insurance cover.
Unless a super fund member chooses to opt-out, then this mechanism will combine their inactive account with the member’s active account.
The Government has announced that lost and inactive accounts (two years without contributions or rollover) with balances less than $1,000 will be automatically consolidated into the active account unless the member opts out.

Term, TPD and income protection within superannuation

The Government has decided that trustees must allow members to opt-out of life and TPD insurance within 90 days of the member joining a fund, or on each anniversary of the member joining the fund.
If trustees are unable to obtain opt-out cover at a reasonable cost, trustees of MySuper products will be required to offer compulsory life and TPD insurance. Trustees of choice products can either offer compulsory insurance or no insurance.
The Government has decided that it will be left to the trustee’s discretion whether to offer income protection insurance on an opt-in or opt-out basis, or at all.

Insurance policy definitions

Currently, there are some insurance policies which offer benefits that may not meet an immediate condition of release when an insurance payment is made to the superannuation fund.
The Government wishes to ensure that the definitions used in all insurance policies purchased through super align with superannuation conditions of release so that insurance is consistent with the purpose of superannuation and that insurance monies are available to members at the time of their disability.
The Government wants this change to be made as soon as possible, and to facilitate a phase-out of existing policies which are not consistent with the Superannuation Industry Supervision (SIS) Act definitions of life, TPD and income protection insurance.
This means that any definition sitting within the superannuation environment that does not meet strict SIS definitions will not be permitted. This will likely have the biggest impact on definitions of TPD within superannuation; specifically, own occupation TPD will likely be banned.
Other TPD benefits that are likely to be affected are ancillary benefits such as: loss of limbs and sight, activities of daily living, and act of daily work. This new provision may also impact income protection benefits.
Agreed value income protection policies may be affected, leaving only indemnity policies within superannuation. Also, it is likely that there will be a ban of ancillary benefits on income protection policies paid in the event of: specified injury, critical illness, and rehabilitation benefits.
Where own occupation TPD proceeds have been used by a client to boost their retirement funding within super, this will no longer be possible.
The only alternative to this will be where an individual has the ability to receive an own occupation TPD benefit outside of super and then makes a non-concessional contribution to super, up to the legislative cap ($150,000 per annum or $450,000 over three years).
Trauma insurance will be banned in its entirety from being held within super; this is consistent with the recommendations of the Cooper Review and the Government’s Stronger Super response in December 2010.
To improve transparency and comparability of insurance provided through superannuation, the Government will consult on an approach to ensure policy terms are disclosed in a standardised way.

Insurance strategy

As part of the Stronger Super reforms, the Government has also indicated trustees will be required to develop and maintain an insurance strategy to demonstrate that insurance is being managed in the best interests of beneficiaries.
The Government has placed a significant emphasis on insurance within superannuation. It appears that their primary objective is to ensure most individuals have life insurance and TPD cover at a reasonable cost.
Jeffrey Scott is the executive manager, business growth services at CommInsure.



FIND MY BLOODY SUPER please

SuperSeeker




Overview

SuperSeeker is a tool that will help you look for your lost and unclaimed super and provide you with a list of possible matches.
SuperSeeker can also help you lodge a request with your fund online if you wish to transfer your lost super to another super account.
It is free to use. The online and phone services are available 24 hours a day, seven days a week.
Search
Online
Using SuperSeeker online is quick and easy. Your search can be completed in a couple of minutes.
To complete a search you must provide your:
  • tax file number (TFN)
  • family and given names
  • date of birth.
Direction icon
Search for your lost super now by using SuperSeeker.

If there is a possible match:
  1. SuperSeeker will display details of any accounts listed on the lost members register (LMR) in addition to unclaimed super and other super amounts held by us. Any lost super listed on the LMR is held by the relevant super funds.
  2. Where an account is found on the LMR, you may wish to consider:
    • contacting the super fund to update your personal details or enquire about your lost account
    • consolidating your accounts, which may reduce your fees and costs.

      If you choose to consolidate your accounts, use SuperSeeker to pre-fill a transfer request, which you can send electronically to your fund. Alternatively, you can print the pre-filled transfer form and send it via mail to your fund.

      To complete an electronic transfer request, you must provide:
    • the ABN of your chosen super fund
    • your member account number.
Attention icon
You are not obliged to transfer your lost super, but you should consider contacting the fund that reported you as a lost member to update your contact information and remove your details from the LMR.

  1. Where unclaimed super or other super amounts held by us are found, you can follow the links to the claim forms provided by SuperSeeker to make a claim. Alternatively, you may contact us directly by phoning 13 10 20 for more information about these accounts.
By phone
Using SuperSeeker on the phone is quick and easy.
  1. Phone our self-help line on 13 28 65 Fast Key Code then 2.
    We will give you important privacy information. Make sure you have paper and a pen ready to write down the details of any lost accounts.
  2. We will ask for your:
    • TFN
    • date of birth.
If there is a possible match:
  1. We will tell you the name of the super fund which holds an account on your behalf, their phone number and your account number.
  2. Where an account is held by a fund, you may wish to consider:
    • contacting the super fund to update your personal details or enquire about your lost account
    • consolidating your accounts, which may reduce your fees and costs.
  3. Where unclaimed super or other super amounts held by us are found, you will be transferred to a client service representative who will provide details of your account.
Attention icon
You are not obliged to transfer your lost super, but you should consider contacting the fund that reported you as a lost member to update your contact information and remove your details from the LMR.

By paper
  1. Download and complete Searching for lost super (NAT 2476, PDF, 137KB).
  2. When you fill in the form you must provide your:
    • name
    • date of birth
    • contact details.
Any additional information you can provide, including your TFN, previous employers and super funds, will help us to identify any lost super which may belong to you.
If there is a possible match:
  1. We will write to you with the results and provide you with:
    • the name of the super fund, their contact number and your account details for any lost super amounts
    • information about any unclaimed super or other super amounts we are holding.
  2. Where an account is found on the LMR, you may wish to consider:
    • contacting the super fund to update your personal details or enquire about your lost account
    • consolidating your accounts, which may reduce your fees and costs.
  3. Where unclaimed super or other super amounts held by us are found, we will provide additional information to help reunite you with these amounts.
Attention icon
You are not obliged to transfer your lost super, but you should consider contacting the fund that reported you as a lost member to update your contact information and remove your details from the LMR.

Common questions

Where will SuperSeeker search?

SuperSeeker will search the lost members register and our other records, including the superannuation holding accounts (SHA) special account and unclaimed super register.

What is the lost members register?

The lost members register (LMR) holds lost member records from all regulated super funds in Australia, other than self-managed super funds (SMSFs). Super funds are required to provide updated information to us by 30 April and 31 October each year.

What is unclaimed super?

Super funds are required to report and pay unclaimed super to us twice a year. There are five types of unclaimed super - that is, unclaimed super for a:
  • member who is 65 years or older
  • non-member spouse
  • deceased member
  • former temporary resident
  • member with a small or insoluble lost member account.
For more information, refer to Unclaimed super.

What will the SuperSeeker results show?

If SuperSeeker finds a match between the details you have provided and details on the LMR,SuperSeeker will provide the account details and contact details of the super fund that may have your lost super. You can then contact your super fund to talk about what to do with your benefits.
If SuperSeeker finds a match between the details you have provided and the unclaimed super or other super amounts held by us, follow the links to the claim forms provided by SuperSeeker, or phone us on 13 10 20 for more information about these accounts.

What should I consider before transferring my super?

Some of the things to consider before transferring your lost super are:
  • fees - if you are not aware of the fees that may apply when transferring super, you should contact your fund for further information before completing this form. Your fund must give you this information. The fees could include administration fees as well as exit or withdrawal fees. The fund you transfer to may also charge entry or deposit fees on transfer. Differences in fees funds charge can have a significant effect on what you will have to retire on. For example, a 1% increase in fees may significantly reduce your final benefit.
  • other benefits - your current fund may insure you against death, illness or an accident which leaves you unable to return to work. If you choose to leave your current fund, you may lose any insurance entitlements you have.
  • check that the fund you are transferring to is able to accept the transfer.
  • If you are unsure what to do, you should seek independent financial advice.
Attention icon
You are not obliged to transfer your lost super, but you should consider contacting the fund that reported you as a lost member to update your contact details.

How can I transfer my lost super to another account?

SuperSeeker can help you transfer your lost accounts by pre-filling a transfer application form which you can submit online or print and send to your fund.
Attention icon
Your fund may ask you to provide copies of your proof of identity documents before they can process online transfers.

Can I lodge my transfer request electronically?

Yes. SuperSeeker will tell you if you are able to electronically submit the completed form to your fund.
You may not be able to lodge the transfer form electronically for one or more of the following reasons:
  • The fund holding your benefits:
    • does not have a current ABN
    • cannot accept electronic transfer requests
  • The fund you are requesting your benefits be transferred to is:
    • not a regulated fund
    • wound up
    • identified as an illegal early release scheme
  • We cannot verify that you are a member of the fund to which you are requesting your benefits be transferred. This may happen if you have only recently opened this account.
Attention icon
Your fund may ask you to provide copies of your proof of identity documents before they can process online transfers.

What if I don't know my TFN?

You can find your TFN on:
  • your income tax notice of assessment
  • correspondence we have sent to you
  • your payment summary - for example, from your employer.
If you have a tax agent, you can ask them for your TFN.
If you still can't find your TFN, you can:
  • phone 13 28 61 between 8.00am and 6.00pm, Monday to Friday
  • visit an ATO shopfront (phone 13 28 61 to make an appointment).
If you are overseas, phone us on +61 2 6216 1111 during business hours on the east coast: 8.00am to 5.00pm, Monday to Friday, Australian Eastern Standard Time or Eastern Daylight-saving Time.
Direction icon
For more information, refer to Tax file numbers (NAT 1753).

How else can I contact you about my lost super?

If you do not want to use SuperSeeker online or our self-help phone service, you can contact one of our customer service representatives and request a search be done for you.
Direction icon
If you are in Australia, phone us on 13 10 20.
If you are overseas, phone us on +61 2 6216 1111 during business hours on the east coast: between 8.00am and 5.00pm, Monday to Friday, Australian Eastern Standard Time or Eastern Daylight-saving Time.