20 May Changes ahead for inactive super accounts: are you affected?
Got an old super fund account you haven’t touched for years? New rules mean “inactive” accounts (ie no contributions or rollovers for 16 months) will lose their insurance coverage from 1 July 2019 – unless you want to keep your insurance and take action now. Low-balance accounts may even be transferred to the ATO for consolidation.
While the reforms will undoubtedly benefit many Australians, some members who wish to prevent unwanted action on their account may need to take action.
The new laws, that apply to “MySuper” and choice products (but not to SMSF trustees or small APRA funds), ban superannuation funds from charging exit fees when a member wants to leave the fund, making it easier for members to close and consolidate their super accounts.
For member account balances below $6,000, funds are also prohibited from charging annual administration and investment fees totalling more than 3% of the member’s account balance.
Currently, many funds offer insurance on a default “opt-out” basis. While insurance is beneficial to many Australians, the government is concerned that some members are signed up for inappropriate or multiple insurance policies and the premiums are eroding their super. The new laws will ban funds from providing insurance to inactive accounts from 1 July 2019.
Funds are supposed to contact affected members, but everyone should check for themselves by asking:
- Do I have an “inactive” account – eg old accounts from previous jobs and if you’re an SMSF member, an old public offer account you keep just for the insurance coverage?
- What insurance am I signed up to? Do I hold multiple policies for the same insurance?
- Do I want to keep the insurance cover?
If you wish to keep the insurance policy, you must make an election in writing before 1 July.
Inactive accounts with balances below $6,000 will be paid over to the ATO, who will then take action to consolidate the person’s super into a single account. Even if your low-balance account has not received any contributions or rollovers for 16 months, the account will not be deemed “inactive” if you have taken actions such as changing investment options or making or amending a binding nomination. You can also elect in writing to the ATO not to be treated as an inactive account member.
Now is a great time for superannuation members to take stock of their accounts and insurance arrangements. Contact us if you need assistance with any of the upcoming changes.