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Gaius Whiffin on 2GB discussing TPD and Superannuation claims

Gaius Whiffin providing Q & A on the 2GB Chris Smith Afternoon Show discussing TPD and Superannuation – 21 May 2019

Tuesday, 21 May 2019


CS– Chris Smith /Gaius Whiffin–   C1,2,3, etc – Callers 


CS       Today in this segment we are going to learn about a change to superannuation that I had no idea about and I’m not sure if many of you did either. From July the first, people with accounts that have been inactive for over 16 months will have their life insurance cover cancelled.  So what does this mean for you? And will it have an impact on your total and permanent disability cover. If you’ve got questions on this topic or anything related to super TPD, you can call the open line right now on 1321 873. I’ve got a $100 Westfield voucher to give away and I’ve got Gaius Whiffin who is a partner at Turner Freeman’s Sydney office in the studio with me now. And Turner Freeman as you know, are lawyers providing specialised service including compensation and negligence law, asbestos litigation, superannuation and disability claims, family and employment law, Wills and estates and property law. NSW offices in Sydney, Parramatta, Campbelltown, Penrith, Newcastle and Wollongong and their Queensland offices in Brisbane, Logan, North Lakes, Ipswich Toowoomba, Gold Coast, Sunshine Coast and Cairns. Gaius. Thank you very much for coming in.

GW     Thanks Chris.

CS       I’ve got my letter. I had my letter and I sent it off and I tried to read it – you know how they make it so difficult. Some of these formula letters are so difficult to interpret and I had to get a second opinion. But then I kind of got the gist of it after I had a chat with the accountant and there’s one superannuation account that I have that I don’t necessarily put into but I stick with it because of the quite generous life insurance policy that’s connected with it. There’d be a stack of people in this boat wouldn’t there?

GW     There is a stack. There is a stack. They reckon about at least 20% of all superannuation accounts – 15 to 20% I think they say of all superannuation accounts that have the potential to be what they call inactive for 16 months and have that insurance cover. So there’s a lot of notifications and the fact that you’ve got a letter is good but there’s a lot of people that haven’t and…….

CS       So why haven’t some people received a letter?

GW     Well I think par…… I mean a lot of these superannuation funds might be very old funds. People have moved on and so forth.

CS       Right so the addresses are all out of whack?

GW     Yes.  So there’s an issue to be fair to the superannuation bodies. In contacting members and informing them of their rights – there’s other things you know – people get letters from the insurance or superannuation fund and they don’t read it properly and so forth. But the real issue is that after the 1st of July this year, if your superannuation account has been inactive for 16 months, you will lose any insurance cover unless you contact the insurer and opt in to have that insurance cover continue and pay the premiums associated.

CS       So you contact the insurer?

GW     Oh sorry – contact the superannuation fund.

CS       The superannuation fund. Yeah. I thought that was the case.

GW     Yes.

CS       It really puts the pressure on retirees because I would have thought they will make up the bulk of superannuation policy holders who are probably in this boat. Would you agree?

GW     Yes that’s probably right. That’s probably right. I mean inactive means there has been no contributions to the fund; there’s been no rollover – it’s basically been staying there. And there is no balance. So it’s not if your superannuation is under $6,000 – some of the other changes that are coming in on the 1st of July apply only to funds that are under $6,000. But this is – the fund itself can be any amount – it’s just a question of whether it’s been active or not.

CS       I want to talk about the other changes related to accounts that are under $6,000 in just a second. Why has the government decided to bring in this reform?

GW     Well it all comes from the Royal Commission and at the end of the day what it is supposed to do is save fees and save premiums. So, what the governments decided and again it comes from the Royal Commission, is that a lot of these accounts are incurring premiums and as a result the account is …… dwindling down. So the whole purpose of the changes, which were brought it – well – which passed in February this year – are to reduce fees; to reduce premiums so that there are savings to the member’s account. It’s supposed to save about 2.6 billion dollars in all. But the………

CS       Margaret’s got a question for you about a situation her son is in. Go ahead Margaret Gaius is listening.

Caller 1 – Margaret

Margaret        Yes. My son’s …… he’s on a job overseas. He’s been there for 18 months and he has a reasonable sort of superannuation here in Australia and I know he would not have put into that in the last 18 months because he’s having superannuation taken out in the UK. Should he top that up quickly before he comes back? He doesn’t come back until September but I mean that is going to be more than 18 months.

GW     Well it’s 16 months but yeah – that’s the perfect example really. I mean at the end of the day, they are going to find it very difficult, even in the days of email and so forth to be able to contact your son and it doesn’t sound like your son’s been contacted in relation to this change. So yeah, he should certainly contact his superannuation fund if he wants to keep his insurance cover. I mean that is an issue too. I mean there are a lot of people that don’t actually want the insurance cover and for some reason or other they haven’t yet – the position in their fund is that they’ve been covered for that insurance cover in the past – it’s been a default position and they don’t want it anymore. So, if your son wants that insurance cover – contact his superannuation body before the first of July.

CS       So Margaret, are you sure that he hasn’t received a letter and you haven’t received one on his behalf either?

Margaret        No. All the mail comes here – everything – his superannuation mail – everything comes in here and I did his tax last year with the accountant and I know he is paying super overseas. He works for Universities so he’s in Uni Super and his premiums – yeah – we looked at it before he went and I said “Gee you don’t pay much for your insurance”. It was quite low. I said “Gee that’s a good insurance policy to have”.

CS       Well Margaret you need to email him straight away and tell him about changes from July 1.

Margaret        So he’s got to put – is there a minimum that he’s got to put in?

GW     Ah – no – I mean it will just continuance, continuance of the cover. So you just. There are different funds that will do it different ways but basically you contact the fund and say you want it to continue and they would continue to deduct the same amount, which should be the same amount.

Margaret        Right…….

GW     That they are deducting at the moment. So if the premiums are so much at the moment, I mean they change obviously with market forces and so forth but they are not going to get more simply because of this law change.

CS       Alright Margaret. Thank you very much for your call – all the very best. What does this mean for total and permanent disability cover?

GW     Well it’s …… the cover is the same whether its life insurance or TPD.

CS       So it will all go?

GW     Yes – it will all go if you ……………

CS       Tell me this though Gaius – wouldn’t the larger percentage of superannuation policy holders in these positions, be the ones that have consciously allowed these funds to continue as opposed to forgetting about them?

GW     Like you know – it’s probably right – because if you haven’t contributed to your fund for 16 months, there’s got to be a reason for it you know. Generally you’re obviously not going to be employed at that particular time. Now a lot of those people are in the situation they are not employed because they might be injured. There’s all sorts of other reasons but why you might…………

CS       But this is purely to save those who have probably forgotten that they are paying administration fees which is eating into their existing superannuation total.

GW     Yes that’s right.

CS       Right. Jane go right ahead.

Caller 2 – Jane

Jane    I was just wondering. I have received one of these letters and I was wondering because I am not contributing to the fund any more like you said. But if..  I think I have got to pay say $350 a year to take the TPD insurance and I’ve got to pay I think $400 for the life insurance, so that’s about say $800 a year of fees to keep that insurance. If I was to start contributing back into my super at say $50 a month, would that take that insurance?

CS       Well the insurance that you’ve got is. I mean if you’ve been quoted those as your premiums then I guess that’s what you need to continue to pay whether you pay it per month or per year I guess is something which you will have to speak to the fund about. If what you are finding is that the premiums have actually gone up significantly because of this law change, then I think that’s firstly – you speak to your superannuation body about why that’s the case because there really shouldn’t be any drastic changes because of this law change – this law change is designed to allow people with not to pay those premiums if they don’t want to. Now and I think that could be a matter for a complaint further if you think the premiums are too high. The premiums should really change. They really should change. I mean any insurance premium goes up from time to time but they really shouldn’t change dramatically and what you’re suggesting is that the premiums I think if you are paying $50 a month that’s $600 a year compared with $800 a year or whatever – that’s a significant gap I think – I think you should try and find out why those premiums have gone up.

Jane    Ok. Alright yeah. Yes because I am quite sure that they have.

CS       Alright. Jane, I’ve got a $100 Westfield Voucher. You can use that to throw into one of those super funds I reckon.

Jane    Oh – good on you. Thank you very much.

CS       No – it’s actually a voucher so you can’t. But anyway you’ve got the $100 Westfield voucher. Thank you for calling. Stay right there.

Jane    Thank you.

CS       Okay. 131 873 is the telephone number. So under $6,000 in a super fund. What are the new rules for July 1?

GW     Well what would happen if you’ve got under $6,000 is that the – firstly if it’s an ongoing fund, the fees are capped. They are capped at 3%.  But secondly, if it’s inactive again – so if it’s inactive and it’s the same sort of rule if it has been inactive for 16 months – it will actually get consolidated – so the fund will get sent to the ATO – the ATO will try to match it up with any other funds the member has and consolidate them and if they can’t, then it stays with the ATO and hopefully it gets claimed at some time in the future.  It is probably more likely if someone’s actually looking for their lost super in the past that they are going to be able to get it from this system rather than trying to remember you know – where their super was in 20 years ago or whatever.

CS       Robert – I’ve only got 30 seconds but shoot.

Caller 3 – Robert

Robert            G’day guys how are you?

CS       Good

GW     G’day.

Robert            I’ll be as quick as I can. My wife is ex-military personnel. She served the military for 6 years. She now works for the State Government now. The military super is a fair chunk. She hasn’t contributed for quite some time. We can’t roll I think into the military super because she’s not active anymore. Do you think we should keep the military super or…….?

GW     Well, if you’ve got insurance cover, I think you should investigate it. I mean you need to know a bit more about it and there might be – because it’s military superannuation coverage there might be some specific rules involved there that don’t apply to other people. So, but I think you should certainly investigate it. Ring them up and see whether – see what the effect of these law changes on the 1st of July are in your wife’s case.

CS       Yeah – good advice. I’d also tend to hang onto a military super I would have thought.

GW     Yes. I would have thought.

CS       Gaius thank you very much for that.

GW     My pleasure Chris.

CS       Appreciate your time. Interesting. Gaius Whiffin, partner at Turner Freeman Lawyers.