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Are you insured through your super fund?

Are you insured through your super fund?

Am I up to speed on the insurance cover provided by superannuation in Australia? That’s the question you’ll want to ask yourself in light of research commissioned by the Association of Superannuation Funds of Australia (ASFA) in 2014, which revealed Australians are worryingly out of the loop when it comes to this subject. 

“Insurance provided through super plays an important role in helping to protect people from the financial shocks of unexpected events,” explained Pauline Vamos, ASFA Chief Executive. 

“However, many people remain in the dark about what type of cover they have and whether it’s a good fit for themselves and their family.”

More than two-fifths have “poor” knowledge

Over 40 percent of those surveyed were found to have a poor understanding of the insurance within their superannuation, with around 40 per cent also admitting they didn’t know how to change or choose their level of cover or type of insurance. 

There was a pronounced gender gap in understanding of this subject, as well as an age gap. Just over one-fifth of generation Y respondents, or those 32 years old and under, reported they had “no understanding at all” of the insurance options available through super. While at least ten percent of all other age groups claimed a “very good understanding” of the topic, only 8.6 percent of Generation Y respondents said the same.  

What is insurance through super?

Australian superannuation offers the ability to secure insurance through your super fund, which has several key benefits.

For one, as fund-holders advance in years, it’s not uncommon for them to suffer total and permanent disability or even death, leaving them or their dependents to draw more on their superannuation funds earlier and for longer. According to a 2010 Lifewise/NATSEM Underinsurance report, one in five families will be affected by a parent who either loses the ability to work or dies before retirement age. Securing insurance through superannuation is one way to avoid having to use your hard-earned super funds prematurely. 

In addition to this, you may save money by taking insurance out through your super. Your premiums are automatically deducted from your superannuation fund, which is not only simpler, but may have tax advantages in that it comes from pre-tax income. You also may have a higher chance of being automatically accepted without the requirement of a health check.  However, these benefits will all depend on your particular circumstances – so it is important that your do your research and ask questions.

The types of insurance you can claim

There are typically three main types of insurance offered through super: Life insurance, total and permanent disability cover and income protection insurance. A well-structured combination of these can financially shield you and/or your family if the worst should happen and you are either unable to keep generating an income due to disability, or pass on. 

Remember that, the super fund your employer regularly contributes to may provide a basic level of insurance cover. You should check it out and if you’re not happy with the level of cover provided, you can decrease, increase or even dispense with it entirely. The amount and type of insurance you have in super is your choice.

If you have any other queries about your super fund, don’t join the 40 per cent of Australians with no clue – get in touch with your super fund and don’t be afraid to ask them questions. 

Advice contained in this article is general in nature and not specific to your particular circumstances.  Before making an investment decision you should consider your own financial situation and the relevant Product Disclosure Statement/s.  We also recommend you seek advice about your own particular circumstances from a licensed financial adviser.

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Learn more about superannuation

What happens to my insurance cover if I change superannuation funds?

Some superannuation funds will allow you to transfer your insurance cover, without interruption, if you switch. However, others won’t. So it’s important you check before changing funds.

What should I know before getting an SMSF?

Four questions to ask yourself before taking out an SMSF include:

  1. Do I have enough superannuation to justify the higher set-up and running costs?
  2. Am I able to handle complicated compliance obligations?
  3. Am I willing to spend lots of time researching investment options?
  4. Do I have the skill to make big financial decisions?

It’s also worth remembering that ordinary superannuation funds usually offer discounted life insurance and disability insurance. These discounts would no longer be available if you decided to manage your own super.

What are reportable superannuation contributions?

For employees, there are two types of reportable superannuation contributions:

  • Reportable employer super contributions your employer makes for you
  • Personal deductible contributions you make for yourself

What superannuation details do I give to my employer?

When you start a job, your employer will give you what’s called a ‘superannuation standard choice form’. Here’s what you need to complete the form:

  • The name of your preferred superannuation fund
  • The fund’s address
  • The fund’s Australian business number (ABN)
  • The fund’s superannuation product identification number (SPIN)
  • The fund’s phone number
  • A letter from the fund trustee confirming that the fund is a complying fund; or written evidence from the fund stating it will accept contributions from your new employer; or details about how your employer can make contributions to the fund

You should also provide your tax file number – while it’s not a legal obligation, it will ensure your contributions will be taxed at the (lower) superannuation rate.

What will the superannuation fund do with my money?

Your money will be invested in an investment option of your choosing.

Is superannuation compulsory?

Superannuation is compulsory. Generally speaking, it can’t be touched until you’re at least 55 years old.

How much is superannuation in Australia?

Superannuation in Australia is currently 9.5 per cent – which means that your employer must pay you superannuation equivalent to 9.5 per cent of your salary.

The ‘superannuation guarantee’, as it is known, has been at 9.5 per cent since the 2014-15 financial year. It is scheduled to rise to 10.0 per cent in 2021-22, 10.5 per cent in 2022-23, 11.0 per cent in 2023-24, 11.5 per cent in 2024-25 and 12.0 per cent in 2025-26.

How does the age pension work?

Most Australians who are of retirement age can qualify for the age pension. However, depending on the size of your assets and post-retirement income, you might be entitled to only a reduced pension. In some instances, you might not be entitled to any pension payments.

What happens if my employer falls behind on my superannuation payments?

The Australian Taxation Office will investigate if your employer falls behind on your superannuation payments or doesn’t pay at all. You can report your employer with this online tool.

How do you access superannuation?

Accessing your superannuation is a simple administrative procedure – you just ask your fund to pay it. You can access your superannuation in three different ways:

  • Lump sum
  • Account-based pension
  • Part lump sum and part account-based pension

However, please note that your superannuation fund will only be able to make a payout if you meet the ‘conditions of release’. The conditions of release say you can claim your super when you reach:

  • Age 65
  • Your ‘preservation age’ and retire
  • Your preservation age and begin a ‘transition to retirement’ while still working

The preservation age has six different categories:

Date of birth Preservation age
Before 1 July 1960 55
1 July 1960 – 30 June 1961 56
1 July 1961 – 30 June 1962 57
1 July 1962 – 30 June 1963 58
1 July 1963 – 30 June 1964 59
From 1 July 1964 60

There are also seven special circumstances under which you can claim your superannuation:

  • Compassionate grounds
  • Severe financial hardship
  • Temporary incapacity
  • Permanent incapacity
  • Superannuation inheritance
  • Superannuation balance under $200
  • Temporary resident departing Australia

How many superannuation funds are there?

There are more than 200 different superannuation funds.

How do you claim superannuation?

There are three different ways you can claim your superannuation:

  • Lump sum
  • Account-based pension
  • Part lump sum and part account-based pension

Two rules apply if you choose to receive an account-based pension, or income stream:

  • You must receive payments at least once per year
  • You must withdraw a minimum amount per year
    • Age 55-64 = 4%
    • Age 65-74 = 5%
    • Age 75-79 = 6%
    • Age 80-84 = 7%
    • Age 85-89 = 9%
    • Age 90-94 = 11%
    • Age 95+ = 14%

If you want to work out how long your account-based pension might last, click here to access ASIC’s account-based pension calculator.

Is superannuation paid on unused annual leave?

If your employment is terminated, superannuation will not be paid on unused annual leave.

Am I entitled to superannuation if I'm a part-time employee?

As a part-time employee, you’re entitled to superannuation if:

  • You’re over 18 and earn more than $450 before tax in a calendar month
  • You’re under 18, you work more than 30 hours per week and you earn more than $450 before tax in a calendar month