The Risk of Insurance Loss !

At some point in their lives, many people have had a variety of short term jobs and consequently they find themselves with a multitude of different superannuation accounts.   Each of their employers have paid in to  whatever scheme the business has chosen and consequently individuals have many such accounts with a small account balance.

The problem is that when they finally retire they will lack the nest egg to keep them comfortable for the rest of their lives.  Many of the funds are inefficient because of their size and because of the many job changes no further contributions have been made for a long period of time.  The government has introduced a scheme to combine these small superannuation accounts to achieve economy of scale.

The industry is warning the people who own this superannuation to carefully read the letters they are getting from their funds.  As part of this superannuation many funds also provide life insurance cover and total and permanent disability protection, plus income protection.   That cover will lapse unless the insured chooses to opt in or reinstates the fund by making fresh contributions.  The cut off point is where funds have not received a contribution for the past sixteen months.

That insurance cover is a form of protection many account holders have forgotten and the small annual premiums are eating away at their account balance.  In some instances their health situation has changed since the cover was introduced and they may not qualify for similar cover today.  It would be in their interests to keep that insurance cover valid.

The big danger is that many people may do nothing and allow these accounts to lapse.  One of the biggest superannuation funds reports that with 220,000 contributors the response at June 1 had been about six percent who had reactivated dormant accounts.  It is important account holders seek advice to gain the best outcomes from this change.

It is highly likely that many with such scattered superannuation holdings have become home owners and are paying off a home mortgage.  It is usual for such home mortgages to include insurance cover to eliminate the balance owing on the death of one of the contributors and provide cover against disabilities.  They may have adequate private cover in place and no longer need the cover provided with their superannuation.  It is important that this be evaluated.

Th biggest danger is apathy.  Where account balances are small people tend to disregard letters and emails and take no action.  In many cases this consolidation will achieve the result of getting that money earning again and keeping in place the insurance cover that may otherwise be hard to now achieve.

The date when action will commence is getting close.  It will happen on July 1  !