New laws, designed to ensure superannuation balances are not being eaten up by insurance premiums and fees, could see some Australians actually lose money.
New laws to be introduced in July will see accounts that had no contributions for 16 months or that hold less than six thousand dollars transferred to the Australian Taxation Office.
But there are concerns that people holding these accounts could potentially lose their life insurance, and total or permanent disability funds unless they contact their super fund.
Deloitte superannuation advisor Russel Mason says that could impact negatively on some people.
Mr Mason says that some groups of people may not even know the changes are coming.
“It could particularly affect people where English is not their first language and people in isolated parts of Australia, indigenous communities for instance, where they may not get regular communication.”
Kristin Hartnett is a financial counsellor for the Salvation Army.
She shares Mr Mason's concerns, and says the people who will be most affected by the proposed changes are the people who can least afford it.
"The people who are going to be adversely affected by this are the people that are already at a disadvantage, so the people who aren’t working, people who are unemployed and did not have any contributions paid into their super fund, Kristin Hartnett said.
She says for many people their insurance was a lifesaver.
Many people have insurance rolled into their superannuation accounts, with payments coming out automatically.
Under the new rules, if that superannuation account is closed, that insurance can lapse - and Russel Mason says it will not necessarily be easy to reinstate it once that's happened.
"If they come back some time later, the fund and the insurer may say 'we are happy to reinstate it, but you will have to provide medical evidence that you are in reasonably good health and are a good insurance risk' If someone has a pre-existing condition, and they are currently covered and it lapses, they may find it’s impossible to reactivate their cover two or three months down the track,” Mr Mason said.
University of Sydney finance professor Susan Thorp says there is no need to panic.
She says the first thing people should do is contact their super fund.
If they get in touch they can choose to keep their insurance.
Professor Thorp says the second thing people need to do is check what cover they actually have.
"Many of us have more than one account, and we need to find out if that’s the case for us. The easiest way to do that is through the Australian Tax office, so the myGov site, if it’s connected with the ATO will have a list of your super account and you can see that there and you can decide which one you want to keep active. Most of us are better off with only having one account,”professor Thorp said.
She says people can use the MyGov site to consolidate their super accounts into the one they prefer.
And then she says that super account needs to have up-to-date contact details.
