The big superannuation change that may make you $40,000
New superannuation rules are on the way and they will save Australians plenty over their working lives.
Automatic life insurance will soon be stripped from up to 1.5 million super accounts worth less than $6000 and from new accounts for people under 25.
Legislation for the changes passed parliament last month and super specialists say now is the time to check your fund before the new rules start on April 1.
Australian Taxation Office data shows two in five Australians have more than one super account and almost 15 per cent have at least three.
The average insurance premium in super is $300 a year. If that money instead stays in a member's super account between ages 18 and 25, the $2100 in savings can compound to $40,000 by the retirement age of 67.
A new report by the Association of Superannuation Funds of Australia (ASFA) says the low-balance rule will lead to 1.5 million accounts potentially losing insurance cover on April 1 next year. It says the under-25s rule will affect another 100,000 accounts annually.
ASFA CEO Martin Fahy said people should consider their insurance needs and contact their funds quickly.
"Insurance cover will be switched off unless the member elects to maintain insurance," he said.
"The under 25 measure is prospective so will only affect members who are under 25 and join after 1 April. Some funds may also introduce arrangements in relation to dangerous occupations where insurance cover would continue on an opt-out basis."
Dixon Advisory head of advice Nerida Cole said most people aged under 40 wanted their super to look after itself and did not want it eroded by unnecessary fees and insurance costs.
"It's one of the biggest complaints we get from people with multiple accounts - they get their statement and realise it's been eaten away by premiums they didn't know were coming out," she said.
"For young people sometimes the whole account gets eaten away."
Ms Cole said people should check super balances and insurance with their funds over the phone or online. She said online calculators could help people work out their insurance needs, and those unsure of what accounts they had should check my.gov.au.
"Once you have logged in, it lists your super funds," Ms Cole said.
"Some people think it's hard to find super but MyGov has made it much, much simpler. Try again - it's a lot easier."
ASFA's new report also examined the recent super changes in July that stopped automatic life insurance for people whose super accounts had been inactive for 16 months. It says three million people were affected and more than 16 per cent had opted to keep their cover by contacting their fund.
Dr Fahy said the 16 per cent opt-in rate was "actually quite a high average rate".
"Typically the rate of members opting for something other than the default arrangement in superannuation is quite low, usually below 10 per cent," he said.
"Life insurance in superannuation is affordable, often cheaper than insurance outside of super, and traditionally has not required underwriting or risk assessment."