How does the Protecting Your Super Package impact my super fund account?

The Protecting Your Super reforms require trustees offering MySuper and choice super fund accounts to inform members when the insurance coverage on their inactive super fund account will expire. Trustees can consider a super fund account inactive if it does not receive any contributions or rollovers for 16 consecutive months. Per the reforms, before trustees mark an account inactive, they have to inform the account holder after nine and 12 consecutive months of inactivity about their options regarding keeping the account active and maintaining the insurance benefit provided with the account. 

The super fund trustee should also inform the account holder about the fees charged for the ongoing insurance coverage and the date this coverage expires, along with the fact that this current policy will remain in effect until expiry even if the super fund account is rendered inactive. 

Further, they should send the account holder a final inactivity notice after more than 15 months of inactivity. They can subsequently cancel the insurance coverage once the policy lapses. If the account holder chooses to continue paying for the insurance benefit, the trustee should inform them that the coverage can be cancelled later and explain the procedure for doing so as well.

According to the Australian Taxation Office (ATO), your super fund account can be considered inactive if the following criteria are met: 

• Your balance is lower than the threshold amount of $6,000
• No contribution has been received in the fund for the last 16 months
• You haven’t met a prescribed condition of release
• The account isn’t a defined benefit fund account
• There’s no insurance on the account
• The account isn’t held in a self-managed super fund (SMSF) or small Australian Prudential Regulation Authority (APRA) fund.

The ATO also lists certain actions that may prevent your account from being considered an inactive low balance account despite meeting these conditions. For instance, if you have less than $6,000 in your super account and no contributions were made to your account for 16 months, but you changed your investment options or made changes to the insurance coverage in this period, your account won’t be considered inactive.

If you have a MySuper or choice super fund account, the maximum fees that can be charged are 3 per cent per annum if your final balance is less than $6,000 in an income year. However, you could find super funds that charge you less than the maximum prescribed fee of 3 per cent per annum. It could be worth comparing super funds with different features and fees to find one that gives you the best value for your money. 

If you don’t want to switch to another fund and end up paying more than the upper limit on your inactive super fund account, you will be refunded the excess amount. The refund will be paid out by the first quarter of the next financial year. The percentage of your account balance that constitutes the fee cap is specified as part of the Protecting Your Super package.

Further, the Protecting Your Super reforms also ban super funds from charging exit fees when members decide to close their super fund and roll over the balance to another super fund account. This allows you to switch to another super fund at any time without paying a penalty for your choice. The aim is to enable users to make practical decisions for growing their retirement nest egg rather than worry about paying unnecessary fees to their super fund if they find a better deal elsewhere.