Putting Members’ Interests First (PMIF) law was passed in September 2019 and is likely to affect the children of our clients, and perhaps even a few clients who hold insurance within superannuation.
This legislation will see insurance for new superannuation members under the age of 25 become subject to opt-in and all members with an account balance of less than $6,000 changed to opt-in.
Our advice is to encourage all young Australians to accept the insurance provided by their superfund and please pay careful attention to any correspondence that is received from their superfund in the coming months. Individuals under 25 or with a super balance under $6,000 will have to “Opt In” to retain or obtain insurance cover within superannuation, which will require physical action on their behalf.
Superannuation fund trustees are required to write to all fund members with a balance of under $6,000 (as at 1 November 2019), by 1 December 2019, to advise them of this change and to give them the opportunity to choose to opt-in to retain their insurance.
The PMIF law affects:
- members with a super balance under $6,000
- new members aged under 25
People with a super balance under $6,000
Under the new PMIF laws, super providers will check the balance of all super accounts with insurance on 1 November 2019.
Where an account balance is below $6,000 (and no exemptions apply), the superfund must let the member know their insurance will be cancelled, unless:
- the balance reaches $6,000 before 1 April 2020, or
- the member requests to keep their insurance (opts in).
People under 25
From 1 April 2020, super funds must not provide insurance inside super to new members aged under 25 – unless the member requests it.
This is a scary new piece of legislation in our opinion. Many young Australians will automatically lose their insurance coverage on 1 April 2020.
This cover was previously generally offered under the terms of automatic acceptance, meaning individuals were not required to answer health related questions to obtain the insurance. This cover is very useful in a client portfolio. When some younger clients apply for insurance cover later in life and are asked to answer the numerous health related questions, they can sometimes find for the first time that they are uninsurable.
For example, we see insurance offered at substandard rates for younger Australians due to pre-existing sporting injuries, medical conditions or “at risk” lifestyle choices. Unfortunately, this disclosure will likely result in a policy with exclusions and very high loadings.
We do believe that opting in to insurance in superannuation may potentially enable some people to have cover later in life when they may otherwise be uninsurable due to not meeting strict underwriting and health requirements.
Many people are tempted to ignore correspondence from our superannuation funds, though with significant recent changes affecting insurance held within superannuation through PMIF laws and Protecting Your Super Reforms, it has become important to open and read correspondence sent by your superannuation fund. Unopened mail may place your valuable insurance cover at risk of cancellation. We encourage all our clients to please pay careful attention to any correspondence that is received from their super fund in the coming months.