There have been a lot of changes to our superannuation lately, some of it stirred on by the COVID-19 pandemic, others have been in the works for a while now. With all these changes it is understandable that there’s a lot of confusion out there about what is happening with our hard earned super. This article aims to answer some of your questions.
The Putting Members' Interest First legislation and your superannuation insurance
On 1 April 2020 the Putting Members’ Interest First legislation came into effect. The legislation is designed to stop you from paying fees and insurance premiums if you have a low balance or if you are under 25 years old.
Most superannuation funds are required to provide their members with insurance cover to ensure they’re covered in the event of serious injury, illness or death. The two types of insurance that are typically available to you within your superannuation fund are death cover and total and permanent disability (TPD). TPD and death cover insurance can assist you financially if you can no longer work due to an accident or if you fall ill, or can assist your family financially in the event you pass away. Your fund may also offer income protection benefits, in the event you temporarily cannot work.
The new reforms mean that your insurance cover will have been removed at 1 April 2020 if you were under 25 years old and did not notify your super fund to retain your cover, or if your super account balance did not reach $6,000 at any time between 1 November 2019 and 1 April 2020. If your super account balance had $6,000 or more in it between the period of 1 November 2019 and 1 April 2020, your insurance cover will continue even if your super balance falls below $6,000 in the future, which is good news. If your insurance had been cancelled and you wish to reinstate your cover, you should speak with your super fund about your options.
The new rules also provide that from 1 April 2020, standard insurance cover for new members will only start automatically where the member has a balance of $6,000 and is aged 25 or older.
If you’re unable to work or return to your usual job because of an injury of illness, and would like to know whether you’re entitled to a superannuation insurance benefit, you can check your rights with our free Online Claim Check in only a few minutes.
Early access to superannuation
This one has been in the news the most and is a part of the Federal Government’s measures to support Australians who have been impacted by the pandemic.
Normally, our superannuation benefits can only be accessed once we meet a condition of release (usually retirement), but the government is currently allowing people who have been affected by COVID-19 to access up to $10,000 from their super balance (tax free) for the 2019/2020 financial year, and a further $10,000 in the 2020/2021 financial year, which means from 1 July 2020, people facing financial hardship as a result of the pandemic can once again access their super accounts early.
As many financial experts have noted, the decision to access your super early should not be taken lightly, as it may have long-term financial impacts. Even temporary access to your superannuation fund could reverse the benefits you have accumulated specifically for retirement.
If you do decide to withdraw funds from your super early, as we mentioned above, your insurance won’t be cancelled even if your balance falls below $6,000 after the withdrawal, so long as you had $6,000 or more in your account at any time between 1 November 2019 and 1 April 2020, which again is good news and keeps you protected. But you still need to make sure that you have enough funds in your account to pay your insurance premiums, otherwise your insurance may stop, leaving you unprotected. Speak with your super fund to check what the minimum account balance is to maintain insurance cover.
If you are struggling financially, you can contact the National Debt Helpline on 1800 007 007 or visit their website for help.
Temporarily reducing the minimum superannuation payment amounts
Another measure in the government’s support package during the pandemic is to assist retirees by reducing the minimum payment requirements of pension products by 50% for the 2019/2020 and 2020/2021 financial years.
Most superannuation pension products are subject to rules that determine a minimum amount that needs to be paid out each financial year, which means when you start a pension, there is a minimum drawdown amount that needs to be paid each year. But because the financial markets are so uncertain due to COVID-19, it has had a negative effect on the super balances of many Australian retirees. To assist retirees, the government has temporarily reduced the minimum annual amount that needs to be paid out for pension products by 50%. This measure will benefit retirees by reducing the need to sell assets to fund current and future pension payments from their superannuation balances.
While the full economic impacts of COVID-19 continue to unfold, we know many people will be affected in the short and long term. If you require additional support we have compiled a list of community resources that may help you navigate through this.
The contents of this blog post are considered accurate as at the date of publication. However the applicable laws may be subject to change, thereby affecting the accuracy of the article. The information contained in this blog post is of a general nature only and is not specific to anyone’s personal circumstances. Please seek legal advice before acting on any of the information contained in this post.