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Your super is changing: What this year’s Federal Budget means for your superannuation and retirement

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Attwood Marshall Lawyers Compensation Law Senior Paralegal, Amy Lewis, discusses the recent changes to superannuation and what this means for your super balance and superannuation insurance policies.

The good news – Super to increase by .50% on 1 July 2021 to 10%

There has been good news delivered in the recent Federal Budget announcement for superannuation. The super guarantee is due to increase from 9.5% up to 12% on 1 July 2025. The super guarantee is the minimum percentage of your earnings that your employer must pay into your superannuation fund.

From 1 July 2021, you can expect to see your super guarantee rise by 0.50% from 9.5% to 10%. This is great news as this will help support a better retirement for millions of Australians in the future.

Although this is a good thing for superannuation balances, it can mean the take-home pay for some employees will slightly decrease.

If you are paid on a “package” arrangement inclusive of superannuation, this means your employer can decrease your take-home pay by 0.50% to pay the additional amount into your super fund. 

On the other hand, if you are paid on a “plus super” agreement, your take-home pay will not change, and you will still receive the additional 0.50% superannuation boost, courtesy of your benevolent employer.

Why it is important to review your superannuation regularly

We asked Tony Dodd, Client Service Manager at Legal Super, what is most important to consider when determining if a super product is right for you.

“There are generally five things you should look at when considering if a super fund is right for you. Firstly, performance. Compare your fund’s investment performance over at least 5 to 10 years. While past performance doesn’t guarantee future performance, it can give an indication if the fund has a track record.”

“The second thing to look at are fees. All super funds charge fees: make sure your fund’s fees are competitive with the rest of the market. Then there’s insurance. Super funds typically have three types of insurance for members, the premiums for the insurance cover comes out of the balance of your account so while most people understand fees are important, insurance premiums are equally important as excessive premiums can erode your balance”, explained Mr Dodd.

“The final two things that should play a part in determining if a super fund is right for you are investment options and services. Most super funds have a myriad of investment options, so make sure your fund has the options that suit your investment philosophy and needs. It’s also important to look at what other services your super fund offers, can you get personal advice, can you get a discount on home loan rates or health insurance premiums, for example,” said Mr Dodd.

Mr Dodd explained that members should review their superannuation insurance policies whenever they change their jobs as a new employer might have access to a better default superannuation arrangement. It is also important to review your superannuation insurance policies whenever you have a change in your life, for example, you get a mortgage, get married, or have children.

By reviewing your superannuation regularly, you can ensure you are making adequate provision for your future, and that you have the insurance policies in place to protect yourself if the unexpected happens. 

“The cost of insurance as you get older can be considerable, so make sure you are only paying for what you need. While insurance is generally offered to new members who have an employer making contributions to their account, the amounts and types of insurance need to be checked to make sure you are only applying for the insurance you require. While there is generally no issue with having more than one life insurance policy, you cannot claim on two income protection policies at the same time,” said Mr Dodd.

Did you know that after the MySuper Legislation changes came into effect in 2019, superannuation funds could cancel insurance on accounts that had not received a contribution for 16 months or more, unless the member elected to continue their insurance? This was put in place to try to protect your superannuation account from erosion due to excessive fees or unnecessary insurance. However, many people did not realise that they were stripped of their insurance in these instances and are no longer protected by this cover. Mind you, most people did not know they were still covered by these super accounts!

Most super policies have a default amount of cover for TPD and death which usually decreases as you get older (the lump sum differs greatly from fund to fund, but for example, Legal Super’s cover for someone 25-44 years is $440,000.00 provided you are over 25 and have a minimum account balance of $6000). The premium is deducted from your super payments and this cover is compulsory. Prior to default insurance in superannuation becoming compulsory, workers could opt in or out of this cover, but now everyone must have this basic level of TPD and death cover which is automatically provided by their superannuation fund so long as they meet the eligibility criteria.

An example of default insurance cover for employer-sponsored members of Legal Super:

Current Age Type of Cover Sum Insured Cost per week (fee)
Up to 24 (if opted in by member) 2 units of death & TPD $220,000 $5.28
25-44 4 units of death & TPD $440,000 $10.56
45-49 4 units of death & TPD $280,000 $10.56
50-54 4 units of death & TPD $200,000 $10.56
55-59 4 units of death & TPD $160,000 $10.56
60-64 4 units of death & TPD $80,000 $10.56
65-69 4 units of death & TPD $40,000 $10.56
70-74 4 units of death cover only $20,000 $7.44
75-79 4 units of death cover only $10,000 $7.44

Cbus is the leading Industry Super Fund for the building, construction, and allied industries in Australia. Below is an example of the default insurance cover for their members which is based on 1 unit (as of 31 October 2020):

Source: https://www.cbussuper.com.au/content/dam/cbus/files/forms-publications/insurance/Manual-Insurance-Scales.pdf

It is imperative that you review your superannuation and insurance policies each year, just as you would for your car or home insurance policies, to ensure you hold appropriate cover that meets your needs.

Ensuring you are protected: The 3 main types of cover – TPD, Life & Income Protection

There are various insurance policies you may already have, or have available to you, through your superannuation. These include:

TPD Insurance

Total and Permanent Disability Insurance, also referred to as TPD insurance, pays you a benefit if you become disabled due to injury or illness and are unable to return to work. It is important to note that different insurance policies have different terms and conditions and you need to meet your insurance policy’s “terms” in order to qualify to claim TPD insurance. Some insurance policies require you to be unable to return to your “usual” work after suffering an injury or illness, where others may require you to be unable to return to “any” form of work. The difference in wording of these terms can have a significant impact on your ability to lodge a claim and qualify for a payment.

Life Insurance (Death Benefits)

More than 70% of Australians that have life insurance hold it through their superannuation. Life insurance, also referred to as death cover or death benefits, gives your beneficiaries a lump sum, or income stream, when you die, or gives you access to the same benefits if you are diagnosed with a terminal illness. Having your life insurance policy through your superannuation does have its benefits including cheaper premiums, fewer health check requirements, and tax-effective payments. However, your cover may be limited and is often lower than the cover you could get if you were to purchase a policy outside of your superannuation.

It is important to check your amount of cover (it is usually shown on your superannuation statement) and review your overall circumstances. For instance, if you have a dependant spouse and young children with a mortgage, a lump sum amount of $250,000 will probably be no-where near enough cover to support your family if you die unexpectedly. The good thing is that increasing your cover through your superannuation is quite easy and the premiums are usually quite reasonable.

Sometimes, it is wise to obtain advice from a specialist life and TPD insurance broker, although most superannuation companies have inhouse people who can help you with this through your employer. Please do your research and find out what cover is best for you. 

Income Protection

Income protection insurance policies can pay you a percentage of your regular income for a period of time if you are unable to work due to a temporary illness or disability. The amount you will be covered for and the period you may be able to claim will depend on your specific insurance policy. As with TPD and life insurance, some superannuation funds include income protection however this is less common, and it is something you need to opt in for and pay a premium – it is not usually done by default.

There are different sorts of policies and levels of cover which will determine how much your premiums will be. Once again, you should obtain advice from a specialist insurance broker in this area or seek advice from the superannuation fund you are with.

Understanding your rights and knowing what to expect when making a superannuation insurance claim

Insurers have a reputation for using certain tactics to try to deny claims, or at least delay them, when their members try to claim on their insurance policies. Whether the insurer is requesting additional claim proofs without providing reasons, or underpaying a claimant, there are many issues that can arise when trying to access your entitlements. It is for these reasons, and more, that it is important to obtain trusted legal support when making a TPD claim, life insurance claim or income protection claim to ensure you get everything you are entitled to.

At Attwood Marshall Lawyers, we understand what insurers require in order to make your claim proceed smoothly, and we also know what it takes to hold the insurance providers accountable so that you can access your payments as quickly as possible.

Attwood Marshall Lawyers are experts in superannuation and TPD claims

In the unfortunate event you need to make a superannuation insurance claim, we are here to help. In some cases, people hold multiple TPD insurance policies across multiple superannuation funds and may be entitled to make multiple claims in the event they suffer an injury or illness that prevents them from working.

We can investigate on your behalf to determine exactly what insurance you hold and what you may be entitled to claim and assist you throughout the entire claim’s process. We want to help you get your life back on track so that you can focus on your health and wellbeing, whilst having financial security.

For a free, no-obligation initial consultation, contact our Compensation Law Department Manager, Kelli Costin, on 07 5506 8220, email kcostin@attwoodmarshall.com.au or free call 1800 621 071 at any time.

You can visit our lawyers at any of our conveniently located offices at Coolangatta, Kingscliff, Robina Town Centre, Brisbane, Sydney, or Melbourne.

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