Super stapling - Don’t be left without TPD insurance in your time of need

New super accounts will no longer be created every time a worker changes jobs meaning they will have one single default account that follows them, from 1 July 2021.

The “stapling” reform was announced by the Federal Government in 2020, to avoid workers ending up with multiple super funds, paying multiple insurance premiums and account fees, causing their superannuation balance to shrink unnecessarily before retirement.

While keeping your balance as high as possible is a positive, the move may come at a cost to some people finding themselves without insurance if they fall ill or become injured after moving to work in a more dangerous industry where their insurance policy does not protect them.

Ahead of the changes in July 2021, it’s important to understand what your super insurance covers you for, in the event of an injury or illness. Total and Permanent Disability (TPD) insurance can assist to ease the financial burden if you are permanently injured or ill and cannot work.

Some life and TPD insurance policies exclude hazardous jobs based on working conditions meaning a person in that role would be ineligible to claim against their own policy after paying premiums.

Consider, a 15-year-old working part time in retail or hospitality would typically start their working life attached to a retail fund such as REST or HostPlus. If this young person moves into a job which is considered high risk, such as mining or construction, they may find their existing insurance cover may not extend to this type of work, if they suffer an injury or illness.

From 1 July 2021, if an employee does not nominate an account at the time they start a new job, employers will pay their super contributions to their existing fund. Employers will access information about the new worker’s existing super fund from the ATO. If an employee does not have an existing super account and does not choose a fund, the employer will choose the fund.

The Federal Government last year decided workers in dangerous occupations would continue to receive automatic default insurance cover and continue paying premiums, while ending the automatic default cover for members with a low super balance and those new members under 25.

If you end up working in a dangerous industry and have an insurance policy that doesn’t cover your hazardous occupation or job title, you might end paying for insurance you cannot claim on.

While it is true that retirement savings will be preserved by this measure, having more than one superannuation account can mean the benefit of more than one insurance policy and each may offer different levels of cover depending on your injury or illness.

As always, it’s best to make an informed choice about a super fund and the insurance cover it provides. An annual health check of your super is recommended to ensure your policy meets your individual needs.