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Protecting your Super legislation: how the changes could affect you

In February 2019, the Federal Government passed legislation to support the Protecting Your Super Package introduced in the 2018/19 Budget.

The Protecting Your Super Package introduces several measures that are designed to ensure that members’ super balances are not eaten into by unnecessary fees and charges.

The new law requires super fund trustees to:

  • turn off a member’s default insurance when their account has been inactive for more than 16 months;
  • protect low balance super accounts by setting a limit on the fees that can be deducted each year; and
  • transfer low balance inactive accounts to the Australian Taxation Office (ATO) to enable multiple accounts that a member may hold to be consolidated into their main account.

Importantly, the new legislation does not take into account whether cancelling insurance and the low balance transfers to the ATO best suit someone’s personal circumstances. So read on to see how the changes might impact you and what you can do about them.

Capping of fees and removal of exit fees

Have you got less than $6,000 in a super account?

From 1 July 2019, there will be a limit on the amount of administration fees, investment fees and certain costs that can be charged to members with an account balance of below $6,000.  The total combined amount of these fees will be capped at equal 3% of that member’s account balance.

If your First Super account falls into this category, you don’t need to do anything to activate the fee cap – we will process that for you automatically.

Also from 1 July 2019, there will no longer be exit fees on any super account, regardless of account balance.

Exit fees are seen as one of the reasons for putting members off consolidating multiple super account balances.  Consolidation of accounts, also known as “rolling in”, saves you from paying fees across several accounts and prevents your super savings from being eroded unnecessarily.

To find out more about combining your other super balances to First Super, visit our Roll In Super web page.

Insurance and Inactive Member Accounts

When you joined First Super, you automatically received a ‘default’ level of cover for Death and Total and Permanent Disablement (TPD). The level of default cover you receive depends on your age and employment type.

If you are not sure what insurance you have or how much cover you have, it’s detailed on your Annual Member Statement. Alternatively, you can check by calling our Member Services Team on 1300 360 988 or logging into your firstonline account.

From 1 July 2019, First Super will have to switch off a member’s insurance cover when their account has been inactive for 16 months.
For the purposes of this law, an account is considered “inactive” when:

  • First Super has not received a payment (such as a rollover or contribution) to your account within the past 16 months; and
  • You have not elected to keep your insurance inside super.

What happens if I’m affected?

  • If your First Super account was inactive for 6 months or more as at 1 April 2019, you will have received a letter from us explaining these changes and the options for keeping your insurance.
  • You can elect to keep your First Super insurance cover now through this online opt-in form.
  • You can also avoid losing insurance by making a contribution to your account, which would activate your account again.
  • If you don’t elect to keep your insurance and your account doesn’t receive any payments, your First Super insurance cover will end on the date we advise you that follows a continuous period of 15 months during which we have not received a contribution or rollover into your account.
  • From 1 July 2019, we will write to members when their account has been inactive for 9, 12 and 15 months, and give them the opportunity to opt in to keep their insurance cover.
  • A member’s insurance cover continues until it is cancelled. Your rights to be covered by insurance remain unaffected until the end of the period for which premiums have been charged.

Want to know more?

You can find more details about these changes on our dedicated Insurance and Inactive Member Accounts web page. Alternatively, for help on this or any other super matter, please contact our Member Services Team on 1300 360 988.

Inactive account transfers to the ATO

If you haven’t made a contribution to your First Super account for 16 months and have a balance below $6,000, then we may need to transfer it to the ATO. This won’t affect members who have changed their investment option and/or insurance cover (e.g. increase cover amount) and/or made a binding nomination of death benefits.

Under the new legislation, super funds will need to identify inactive low-balance accounts as at 30 June 2019, then transfer the unclaimed super money to the ATO by 31 October 2019. The ATO will then try and reunite your account with an active account elsewhere.

After 31 October 2019, these transfers to the ATO will become an ongoing process for any member’s low balance account has been inactive for a period of 16 months running.

Am I affected by this change?

Your account may be transferred to the ATO if:

  • your account balance is less than $6,000;
  • we have not received a contribution or rollover to your account for 16 months;
  • you have no insurance cover; and
  • you have not met a condition of release.

However, an inactive low-balance account is deemed to be active if any of the following have occurred within the past 16 months:

  • you changed your investment option(s);
  • you changed your insurance cover;
  • made or amended a binding Nomination of Beneficiary;
  • you notify the ATO in writing that you are not a member of an inactive low-balance account; or
  • First Super was owed an amount in respect of your account (e.g. unpaid Superannuation Guarantee contributions).

What happens if my account balance is transferred to the ATO?

Accounts transferred to the ATO will no longer enjoy the benefits of profit-to-member super funds, which generally provide lower fees and better investment returns for members.

If your inactive First Super balance is transferred, the ATO will keep your money safe and you won’t pay any fees. Within 28 days of receiving your money, the ATO will try to reunite it with your active super fund if you have one, and where the transfer would take your total balance to $6,000 or more. When you claim your lost super, any interest due will be paid to you. Interest is based on the Consumer Price Index (CPI).

If your account is transferred, you will also lose any insurance cover you have. This means First Super will no longer cover you for Death (including terminal illness), Total & Permanent Disablement (TPD) and, if selected, Income Protection.

How can I stop my account from being transferred?

If you do not want your balance to be transferred to the ATO, the easiest way is to reactivate your First Super account.

For full details of how to make your account active again and to keep your super in your hands, visit our dedicated Hold On To Your Super web page.

Unsure whether to take action?

If you are unsure about whether or not you should be taking any action on any of the above, we encourage you to seek advice. For help on this or any other super matter, please contact our Member Services Team on 1300 360 988.

Further information is also available on ASIC’s MoneySmart website.