The survey of 1,000 Australians found 48% of us have heard of the Federal Government’s Protecting Your Super package. The reforms were designed to stop unwanted life insurance premiums eating into people’s nest eggs by switching off default life insurance in super accounts that haven’t received any contributions for more than 16 months.
The results of the survey come after a significant industry-wide campaign to raise awareness of the changes to life insurance inside super and prompt members to take action.
Among those surveyed, 41% have taken some form of action, including one-third (30%) who contacted their superfunds about the reform, while 35% elected to keep their life cover.
Chief of Group and Retail Partners, MLC Life Insurance, Sean McCormack said while the findings show there’s been a strong response rate to the PYS reforms, as further regulatory changes take effect such as the Putting Members Interest First Bill, the changes may leave many Australians without adequate life cover.
“We strongly believe in the benefits of life insurance in super and think these benefits should be available as widely as possible. We’re concerned that further changes through the Putting Members Interest First Bill will, unfortunately, see some Australians uninsured or underinsured if a tragic event were to occur,” Mr McCormack said.
The results show a majority (77%) of superannuation members thought the PYS reforms were a good initiative, relevant for them, and increased their trust in the financial sector.
More than four in 10 Australians (43%) who were aware of the reforms didn’t act but felt like they should. They said some barriers existed, such as not knowing if they should do anything (20%) and not knowing what to do (14%).
Protecting Your Super package
The Australian Government’s PYS reform package changes came into effect on 1 July 2019. The new laws, which aim to reduce the impact of life insurance and other fees on super account balances, includes removing life insurance for inactive members, changes to fees and the transfer of inactive low-balance accounts to the Australian Tax Office (ATO).
Here’s a snapshot of the changes:
- Superannuation accounts with balances under $6,000 that are inactive (i.e. they haven’t received any contributions, rollovers or other transactions for 16 or more months) will be closed. Those funds will then be sent to the ATO to allow them to consolidate them with a member’s active account.
- There will be an annual cap of 3% of the account balance on investment and administration fees, for all accounts with balances less than $6,000.
- Super accounts with insurance and that are inactive for 16 months will have their insurance cancelled.
- Exit fees will be banned, so super funds can no longer charge you a fee for moving all or part of your money to a different fund.