New super laws effective 1 July 2019
The government recently enacted its Protecting Your Super Package which comes into effect on 1 July 2019. As an adviser there are some key changes that may impact your clients and their overall financial strategy:
- Superannuation funds are required to cancel a member’s insurance cover if the account has not received a contribution or rollover for 16 months;
- Superannuation funds can no longer charge any exit fees when processing a withdrawal or exit;
- If an individual’s superannuation account balance is below $6,000, the total administration and investment fees charged cannot exceed 3% p.a. of the account balance;
- Superannuation funds must transfer all individual accounts with a balance below $6,000 to the ATO if they are inactive for a continuous period of 16 months.
We would like to stress the importance of the first point above in relation to potential cancellation of insurance cover. It is common practice for advisers to recommend a super fund account be left open with a minimum balance to maintain insurance. Under this change, these clients could lose their insurance cover if they are not actively contributing to the account. All super funds are required to write out to impacted members by 1 May 2019 to give them the option to keep their insurance cover via an op-in election.
If you have clients in this scenario, now would be a great time to re-engage with them. For AMG Super clients, there are a couple of strategies you may wish to consider:
- If one of your AMG clients is not currently contributing to their AMG account and has not done so for the last 16 months, we will shortly be writing to these members to give them the option to opt in and keep their insurance cover. Where these members are advised, we will also notify their adviser providing an opportunity to discuss the importance of making an election with these clients to avoid losing existing insurance.
- If one of your AMG clients has another fund with insurance cover attached, you may want to consider raising with them the AMG insurance transfer option where we can replicate their cover in AMG without underwriting.
If you would like any more information about the new Protecting Your Super changes or how your clients may be impacted, please reach out to our Distribution Team.