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Learn more about superannuation

Many superannuation funds offer life insurance coverage for members. If you’re considering taking out an insurance policy, it’s worth first checking to see what (if any) insurance coverage is provided by your superannuation fund.

What types of super fund insurance are there?

Although coverage differs between funds, insurance offered by super funds typically falls into three categories:

  • Death cover – Also known as ‘life insurance’, this coverage allows your beneficiaries to access a benefit when you die, either as a lump sum or ongoing payments.
  • Income protection (IP) cover – If you can’t work temporarily due to illness or disability, you’ll be paid an income for a defined period.
  • Total and permanent disability (TPD) cover – If you become disabled and will likely not be able to work again, you’ll be paid a benefit.

Keep in mind that the default super fund offered by your employer must offer a certain level of life insurance. You can find more information about your coverage by reading your fund’s product disclosure statement.

In most cases, you can also choose to alter or cancel your insurance cover if you’d prefer to take out insurance elsewhere or not have to pay fees through your super.

Pros and cons of superannuation funds life insurance

There are a number of potential pros and cons to having life insurance through your super fund.

Pros

  • Easy to manage – Premiums are automatically deducted from your super balance rather than your bank account, which can make it easier to manage your cash flow.
  • Cheaper – Typically, life insurance through superannuation funds is cheaper because the funds can negotiate a group discount on policies and pass savings on to members.
  • Flexible – You can usually choose your level of coverage.
  • No health checks required – Some super funds don’t require a medical check to be eligible for insurance.

Cons

  • Limited cover – Depending on your fund, the available level of coverage may not be sufficient for your requirements.
  • Beneficiaries aren’t guaranteed – Some funds don’t offer binding beneficiary nominations, meaning the fund’s trustee decides who will get your money in case of your death.
  • Premiums come out of your super – Unless you choose to salary sacrifice the cost of your premium, it will come off the top of your super balance.
  • Slower payments – Because the insurance payout goes to the super fund before it goes to you, processing time for claims can be slower. This is especially the case for death benefits because the trustee has to reach a decision as to the correct beneficiary.
  • Ends at a certain age – Coverage usually ends when you reach age 65 or 70, whereas policies outside of super may cover you for longer.

How to find out if you have life insurance through your super

If your super is with the default fund offered by your employer, then you should have at least the minimum level of life insurance coverage for your age.

However, it’s worth checking the type of insurance cover you have, what you’re covered for, and the cost of your premium. You can find these details by looking at your member statement or logging into your super account online.

Also check how your insurance premiums are calculated to make sure they’re appropriate. For example, if you’re listed as a smoker even though you don’t smoke, you may be paying more than you need to.

How to make an insurance claim through super

If you’re the one making the insurance claim, you’ll likely need to fill out a claim form through your super fund. Claim forms are usually available on a super fund’s website, or you can call and request one.

When making a claim for income protection cover or total and permanent disability cover, you’ll need to provide documentation (such as medical certificates) to support your claim.

In case of your death, your estate or beneficiaries will need to get in touch with your super fund to find out how to claim death benefits. The claim process usually requires documentation to determine the correct beneficiaries of your super money.

How to find superannuation funds with life insurance

Finding the right superannuation fund with life insurance takes some research. Although you may already have life insurance through your fund, it’s important to make sure the coverage is appropriate for your needs. Consider:

  • What type of insurance is offered – death cover, income protection cover, and/or total and permanent disability cover
  • The level of coverage
  • The cost of premiums
  • How long you’ll be covered
  • Whether you can nominate a binding beneficiary

If you’re thinking about switching funds, you can use RateCity’s superannuation comparison tool to see what insurance is offered by different super companies.

Frequently asked questions

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 are personal contributions?

A personal contribution is when you make an extra payment into your superannuation account. The difference between personal contributions and salary sacrifices is that the former comes out of your after-tax income, while the latter comes out of your pre-tax income.

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.

How much extra superannuation can I add to my fund?

There is an annual limit of $25,000 for concessional contributions – that is, money paid by your employer and extra money you pay into your account through salary sacrificing. There is also a limit on non-concessional contributions. Australians aged between 65 and 74 have a limit of $100,000 per year. Australians aged under 65 have a limit of $300,000 every three years.

Who can open a superannuation account?

Superannuation accounts can be opened by Australians, permanent residents and temporary residents. You’re automatically 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

What are the age pension's age rules?

Australians must be aged at least 65 years and 6 months to access the age pension. This eligibility age is scheduled to increase according to the following schedule:

Date Eligibility age
1 July 2019 66 years
1 July 2021 66 years and 6 months
1 July 2023 67 years

Can my employer use money from my superannuation account?

No, your employer can’t touch the money that is paid into your superannuation account.

What fees do superannuation funds charge?

Superannuation funds can charge a range of fees, including:

  • Activity-based fees – for specific, irregular services, such as splitting an account after a divorce
  • Administration fees – to cover the cost of managing your account
  • Advice fees – for personal investment advice
  • Buy/sell spread fees – when you make contributions, switches and withdrawals
  • Exit fees – when you close your account
  • Investment fees – to cover the cost of managing your investments
  • Switching fees – when you choose a new investment option within the same fund

What are reportable employer superannuation contributions?

Reportable employer superannuation contributions are special contributions that an employer makes on top of the regular compulsory contributions. One example would be contributions made as part of a salary sacrifice arrangement.

How much is superannuation?

Superannuation 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

Can I carry on a business in an SMSF?

SMSFs are allowed to carry on a business under two conditions.

First, this must be permitted under the trust deed.

Second, the sole purpose of the business must be to earn retirement benefits.

What compliance obligations does an SMSF have?

SMSFs must maintain comprehensive records and submit to annual audits.

How do I wind up an SMSF?

There are five things you must do if you want to close your SMSF:

  1. Fulfil any obligations listed in the trust deed
  2. Pay out or roll over all the superannuation
  3. Conduct a final audit
  4. Lodge a final annual return
  5. Close the fund’s bank account

What are concessional contributions?

Concessional contributions are pre-tax payments into your superannuation account. The payments made by your employer are concessional payments. You can also make concessional contributions with a salary sacrifice.

What are government co-contributions?

A government co-contribution is a bonus payment from the federal government into your superannuation account – but it comes with conditions. First, the government will only make a co-contribution if you make a personal contribution. Second, the government will only contribute a maximum of $500. Third, the government will only make co-contributions for people on low and medium incomes. The Australian Taxation Office will calculation whether you’re entitled to a government co-contribution when you lodge your tax return. The size of any co-contribution depends on the size of your personal contribution and income.

When is superannuation payable?

Employers must pay superannuation at least four times per year. The due dates are 28 January, 28 April, 28 July and 28 October.