Protecting your super – Legislation changes explained
The Federal Government's Protecting Your Super Package is designed to protect your retirement savings from being eroded by unnecessary fees. The changes came into effect on 1 July 2019.
Below we explain the initiatives and what they may mean for you.
Inactive account transfers to the ATO
Super funds must transfer inactive low–balance accounts to the ATO twice a year. This will stop people paying fees on low balance accounts they've lost track of. The ATO will then work to match this money to active accounts people have at other super funds.
For this initiative, inactive is defined as an account with a balance below $6,000 that has not received a contribution – including employer contributions, personal contributions, transfers from another super fund or the ATO, or the government co–contribution – for a continuous period of 16 months. Other activities counted as 'active' include making a change to investment options, insurance cover or binding beneficiary nominations.
We contacted affected members by mail and email to let them know their account was considered inactive and may be soon be transferred. We advised members how to remain active or that they can complete a form to opt-out of their account being considered inactive.
Before the first transfer on 31 October, Media Super is working with nine other industry super funds to cross-match accounts – before inactive accounts are sent to the ATO, we will try to reunite members' money with an active account at another fund in the group.
Going forward, we will be contacting members on a regular basis to let them know their account is in danger of becoming inactive and how to reactivate it.
Insurance cancellation for inactive accounts
Insurance cover will no longer be provided to members with inactive accounts, unless they elect to keep it. This is intended to stop premiums from unwanted or forgotten insurance cover eroding members' balances.
For many Australians, the death, total and permanent disablement, and income protection cover they have through their super is the only insurance cover they have. While the government is hoping this initiative will stop people paying for multiple insurance premiums, it's important that people check they are not losing vital cover they need.
For this initiative, inactive is defined as an account (regardless of balance) that hasn't received a contribution – including employer contributions, personal contributions, transfers from another super fund or the ATO, or the government co–contribution – for a continuous period of 16 months.
Throughout May and June, we contacted affected members by mail, email, SMS and phone to alert them that they were going to lose their insurance cover on 1 July 2019, if they did not reactivate their account. The only way to reactivate an account for this insurance initiative is to make a contribution. Alternatively, members can complete a form and elect to keep their insurance cover.
We will now be contacting members regularly – at nine, 12 and 15 months of inactivity – to warn them that they will lose their insurance cover if their account reaches 16 months without a contribution.
Note re insurance for members under 25
The Government had proposed a further change to insurance cover, proposing that people under 25 do not automatically receive default insurance cover through super but have to opt in. This change has not been legislated yet; however, based on knowledge of our membership, Media Super already implemented this change effective 1 July 2018.
Any new members under 25 who have joined since then have not received default cover. Young members can apply for insurance cover any time before their 25th birthday, otherwise they will automatically receive default cover when they turn 25.
Fee cap on low balance accounts
Since 1 July 2019, accounts with a balance of less than $6,000 have their administration fees, investment fees and indirect costs capped at 3%.
No more exit fees
Since 1 July 2019, super funds no longer charge members exit fees. This means if members switch funds, move some of their super to another fund, or an account is split in a family law ruling, they will no longer be charged an exit fee.
We're here to help
If you have any questions about the Protecting Your Super Package or you think you may have been affected by one of the changes, please call the Helpline on 1800 640 886.