From July, some Australians could lose their insurance under new superannuation rules, unless they act now.
New laws, designed to ensure superannuation balances are not being eaten up by insurance premiums and fees, could see some Australians actually lose money, according to experts.
As part of the laws, which will be introduced next month, accounts that had no contributions for 16 months or hold less than $6,000 will be transferred to the Australian Taxation Office.
Experts said people holding these accounts could potentially lose their life, and total or permanent disability funds unless they contact their super fund.
Deloitte superannuation advisor Russel Mason told SBS News while these changes will help many Australians to consolidate their super, it could have a negative effect on some people.
"There are many people that have kept a superannuation account with a fund, who did not make contributions, but kept it so that they can maintain their death and disability cover, and there is a concern that people will find their insurance cover ceases without the member realising the impact," he said.
“It could particularly affect people where English is not their first language, people who are travelling and are hard to be made contact with, and people in isolated parts of Australia, indigenous communities for instance, where they may not get regular communication.”
Financial counsellor for the Salvation Army, Kristen Hartnett said she shared that concern.
“What we know, 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,” she told SBS News.
She said for many people their insurance was a lifesaver, and while many funds are trying to get in touch with people, she said, there are some loopholes.
“Whilst the majority of super funds are being really proactive in contacting people who have not had a contribution made, we know that there is a lot of lost super, that people are not contactable through their emails, so what we encourage these people to do is to contact their super fund and have a conversation.”
What happens after the deadline?
After the July deadline, Mr Mason said, it will be difficult for some people to get their money back.
“If a member does not advise his or her fund by the first of July, as an inactive member, that they want to maintain their insurance cover, it will lapse," he said.
“If they come back sometime 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'.
“If someone has a pre-existing condition, and they are currently covered and it lapses, they may find it’s impossible that they reactivate their cover.”
Young people, casual workers or those on low incomes could also be affected
Some young people, low-income earners or casual workers with multiple accounts could also be affected by the changes, as money on super accounts with less than $6,000 will also be transferred to the ATO.
“The government has been concerned that many young people have multiple account balances, this is an attempt to consolidate those balances into one account so that people do not have to pay multiple sets of fees on these small accounts,“ Mr Mason said.
What can affected people do?
As a first step, people who want to keep their insurance should contact their super fund. If they get in touch they can choose to keep their insurance.
The second thing, people need to do is check what cover they have, according to University of Sydney finance professor Susan Thorp.
“Many of us have more than one account, and we need to find out if that’s the case for us,” she said.
“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.”
She also advised people to keep their personal data up to date so that super accounts and the ATO can get in touch.