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Protecting your super changes

The Federal Government’s ‘Protecting Your Super’ package which comes into effect on 1 July 2019 contains a range of changes designed to protect low balance super accounts.

These changes include:

  1. An annual cap on fees and costs of 3% applies separately to MySuper/Choice investment options where balances for either at the end of the financial year, or upon exit, are under $6,000;
  2. Exit fees will be removed;
  3. Accounts that are inactive for 16 months will have any Death / Total and Permanent Disablement insurance on that account cancelled, unless the member advises the Fund in writing beforehand to retain the insurance cover. Note that Club Super’s Income Protection offering is unaffected by these rules;
  4. MySuper/Choice investment options that are separately under $6,000 and are inactive for 16 months will be automatically transferred to the Australian Taxation Office (ATO).
    Further detail on these rules are set out below.

MySuper is the default investment option in Club Super. All other investment options are classified as Choice investment options. If you hold one or more Choice investment options, the fee cap rules at 1. and the transfer of inactive balances to the ATO at 3. will apply to these Choice options collectively, and will apply separately to your MySuper balance.

From 1 July 2019, the fee cap rules are applied separately to:

  1. your MySuper balance;
  2. your Choice investment options (collectively), as follows:
  • If your MySuper balance is less than $6,000 at the end of the financial year, the total combined amount of administration fees, investment fees and indirect costs charged to MySuper is capped at 3% of the balance. Any amount charged in excess of that cap will be refunded within 3 months to your MySuper investment option;
  • If your Choice investment option balances (collectively) are less than $6,000 at the end of the financial year, the total combined amount of administration fees, investment fees and indirect costs charged to you is capped at 3% of the balance of the Choice investment options. Any amount charged in excess of that cap will be refunded within 3 months to your Choice investment options.

These fee cap rules also apply to Income Stream accounts, noting that Income Stream Accounts do not have the MySuper option.

More information about Club Super’s current fees and costs is available in the Product Disclosure Statement and Additional Information documents. The above rules will be reflected in these documents from 1 July 2019.

Application of the cap for members who join or exit the Fund part way through the year

From 1 July 2019, if you join or exit the Fund part way through the year, if the separate balances of your MySuper/Choice investment options is $6,000 or less at 30 June (for new members) or exit date (for exiting members), the annual cap on fees and costs of 3% will be pro-rated based on your period of membership.

From 1 July 2019, super funds will no longer be able to charge exit fees. Up until 30 June 2019, Club Super charged an exit fee of $55. From 1 July 2019, this will be reduced to nil.

From 1 July 2019, accounts that are classified as inactive for a period of 16 months will have any Death/TPD insurance cover cancelled at that time, unless you advise Club Super in writing beforehand that you wish to keep your insurance cover. These rules do not apply to Income Protection cover.

An account is considered inactive if the account has not received any contributions or rollovers in the last 16 months, regardless of the account balance. Income Stream accounts are also subject to these rules, noting that as such accounts cannot receive contributions or rollovers, they are by definition inactive. An Income Stream account may only hold Death cover.

It should be noted that the inactivity period is retrospective. This means that if the account reaches 16 months of inactivity on (say) 12 August 2019, insurance will cease at that time, unless you have provided written advice to Club Super before then that you wish to retain the insurance.

Notification to members

Club Super will issue the following notifications to members:

  • by 1 May 2019, Club Super wrote to members whose account had at least 7 months of inactivity, advising them that if their account reaches 16 months of inactivity on or after 1 July 2019, their Death/TPD insurance will cease at that time, unless they advise Club Super in writing beforehand that they wish to retain their insurance cover;
  • after 1 July 2019, for members with inactive accounts who have not advised that they wish to retain their insurance cover, Club Super will issue notification within 2 weeks of their account reaching 9, 12 and 15 months of inactivity advising them that if their account reaches 16 months of inactivity, their Death/TPD insurance will cease at that time, unless they advise Club Super in writing beforehand that they wish to retain their insurance cover;
  • if a member with an inactive account advises the Fund in writing that they wish to retain their Death/TPD insurance, Club Super will write to the member within 2 weeks (and at least every 15 months thereafter), acknowledging their advice to retain their insurance, and advising that the member may elect to cancel their insurance, and how they can do that.

For the purposes of this rule, MySuper/Choice investment options are classified as being inactive if (separately), they have not received any contributions or rollovers in the last 16 months.
From 1 July 2019, this rule applies separately to:

  1. your MySuper balance;
  2. your Choice investment options (collectively), as follows:
  • If your MySuper balance is inactive for 16 months and at that time is less than $6,000, the balance will be automatically transferred to the ATO, unless:
    • you advise Club Super that you wish to retain your insurance within the Fund; or
    • you have satisfied a relevant condition of release.
  • If your Choice investment options are inactive for 16 months and at that time are less than $6,000 (collectively), the balance will be automatically transferred to the ATO, unless:
    • you advise Club Super that you wish to retain your insurance within the Fund; or
    • you have satisfied a relevant condition of release.

However, an account will not be classified as inactive if any of the following occurred in the last 16 months in Club Super:

  • you changed your investment options;
  • you made changes to your insurance cover;
  • you made or amended a binding nomination of beneficiary;
  • you advised Club Super/the ATO that your account is not an inactive low balance account;
  • Club Super was owed an amount in respect of you.

ATO consolidation of amounts into member accounts

Once the ATO receives low balance inactive accounts, they will aim to identify and pay the amounts within 28 days to applicable members’ active superannuation accounts with a balance above $6,000. This process will help to reduce the number of members’ who hold multiple small accounts and who may be paying fees and costs in multiple Funds.