Protecting Your Super Package – boost for some young and low income earners is a great start, but more still needs to be done

For years, the superannuation balances of young and low income workers have been inappropriately eroded by unfair fees and charges and unnecessary or inappropriate insurance premiums.

In announcing its Protecting Your Super Package as part of its 2018-19 Budget, the Federal Government is finally starting to take steps to stop this inappropriate erosion of people’s super.

The biggest step that the Federal Government has taken is to place some mandatory controls around which members a superfund can automatically charge default insurance premiums.  Currently, most superfunds have automatic opt in for their default insurance.  That means, the member has to actively take steps to opt out of this default insurance.

And as the industry knows, very few people actually do this.

The Superannuation and Insurance Industry had belatedly recognised this as a problem.  And has attempted in its recently released Insurance in Superannuation Code of Practice to head off this issue.

But, thankfully for the young and low income workers, the Federal Government has not accepted this rather lame voluntary code of practice.

New Mandatory Standards

Instead, from 1 July 2019, under the Protecting Your Super Package, the Government will put in place its own mandatory standards.  Under these, superfunds can no longer automatically opt in a member into the fund’s default insurance programme if:

• The member is under 25 years of age;
• The member’s fund balance is less than $6,000; or
• The member has not had a contribution to their superfund account in the last 13 months and the account is inactive.

And on top of this, the Federal Government is taking action against the regressive fees most superfunds charge.  From 1 July 2019:

• All exit fees on superannuation accounts are banned. No longer can your fund charge you to take your money out.
• A 3% cap applies on the administration fees on all superannuation accounts with balances below $6,000. That means someone with a superannuation fund balance of $1,000 can only be charged $30 in fees for the year.  When they are currently paying at least $75 per year.

These new mandatory rules in the Protecting Your Super Package, will go a long way towards helping stop the inappropriate erosion of the superannuation balances of young and low income workers currently getting paid super.

Now all the Federal Government needs to do, is to remove the $450 monthly superannuation guarantee threshold so all low income earners, especially women can benefit.

If you want more tips and ideas of how to improve the health of your wealth and get off the treadmill of working till you drop, why not join my meetup group and get notice of my upcoming live and free events.  Simply click below.

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Do you and your family a favour and start taking steps so you can improve the health of Your Wealth and get off the treadmill of working till you drop.

Wayne Wanders

The Wealth Navigator

wayne@thewealthnavigator.com.au

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