Many Australians have been putting off looking at the bottom line of their super account. COVID-19 has wiped out fair chunks from many accounts, and while some are eagerly watching for a bounce back in their balances, others are preferring to take the long-term view – ignore what’s going on now and look for better days ahead.
And as if the cost of COVID-19 on your nest egg wasn’t enough, you’re now being urged to take a closer look at your super balance, as huge increases in insurance premiums and fees are about to kick in.
The increases have been labelled by The Guardian as “severe” and will come into effect by the end of the year.
An ABC report published by YourLifeChoices on Friday revealed how federal government plans to protect your nest egg may backfire.
The plan to remove the inequities in the super system will lead to the increased premiums, say super funds, with some fees for death and disability cover increasing by double digits and income protection insurance up by 60 per cent.
Millions of Australians do not regularly check their super accounts for new fees and charges. These are the people who will end up paying for expensive cover they don’t want or need.
One fund, Unisuper, increased its combined death and total and permanent disablement (TPD) cover by up to 17.8 per cent at the start of November.
AustralianSuper premiums also increased by around 20 per cent for members who hold income protection insurance. For younger members, that rise was 25 per cent.
Media Super members will cop a 62 per cent increase for income protection insurance next month, increasing monthly premiums for older members by more than $100.
Regular YourLifeChoices contributor Xavier O’Halloran said the increases were a red flag for consumers and has urged everyone to check their fund fees now, or risk big increases to premiums and less money in their savings.
“These increases are a timely reminder for people to check if they have insurance in super, what they are paying, what benefit it offers and under what circumstances it will pay out,” he said.
“For example, people might be surprised to find that income protection generally provides cover for temporary disabilities and not as the name might suggest for any loss of income.”
The Australian Financial Complaints Authority (ACFA) has already received a swathe of complaints, mostly from fund members who never knew they had insurance in the first place.
Many have since requested refunds for insurances they did not want or need.
The increase in premiums has angered many, and yet it is part of an industry and government attempt to make the system fairer.
Superannuation legislation changes that came into effect in April 2020 mean people under 25 or people with accounts under $6000 can opt out of paying insurance on all but one account.
And with fewer people paying super insurance, insurers have been forced to increase premiums for those who do pay.
“Superannuation funds have been putting a lot of these recently announced price increases down to changes which saw people no longer paying for insurance on duplicate, inactive accounts or in situations where cover may have been inappropriate [for example people who are unemployed],” said Mr Halloran.
“Overall, the changes are much fairer as fewer people are paying for policies they can’t claim on.”
Super guru Kirby Rappell says the challenge now faced by industry is to re-engage customers and help them understand how super works.
He said around 25 per cent of people with income protection insurance did not know they were paying for it, noting that this is why members need to read the fine print.
“This is around the time of year when funds send out annual statements to members,” Mr Rappell said.
“Ask yourself, do I have insurance? Check your annual statement and that will tell you what insurance you have and how much it’s costing you.”
Have you checked your super balance lately? Have you noticed any insurance premium increases?
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