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A financial safety net through your superannuation

January 28, 2021

Moneysmart
(ASIC)

More than 70% of Australians that have life insurance hold it through super. Most super funds offer life, total and permanent disability (TPD) and income protection insurance for their members.

When reviewing your insurance, check if you’re covered through your super fund. Compare it with what’s available outside super to find the right policy for you.

Types of life insurance in super

Super funds typically offer three types of life insurance for their members:

• life cover — also called death cover. This pays a lump sum or income stream to your beneficiaries when you die or if you have a terminal illness.
• TPD insurance — pays you a benefit if you become seriously disabled and are unlikely to work again.
• income protection insurance — also called salary continuance cover. This pays you a regular income for a specified period (this could be for 2 years, 5 years or up to a certain age) if you can’t work due to temporary disability or illness.

Most super funds will automatically provide you with life cover and TPD insurance. Some will also automatically provide income protection insurance. This insurance is for a specified amount and is generally available without medical checks.

Cancellation of insurance on inactive and low balance super accounts

Under the law, super funds will cancel insurance on inactive super accounts that haven’t received contributions for at least 16 months. In addition, super funds may have their own rules that require the cancellation of insurance on super accounts where balances are too low.

Your super fund will contact you if your insurance is about to end.

If you want to keep your insurance, you’ll need to tell your super fund or contribute to that super account.

You may want to keep your insurance if you:

• don’t have insurance through another super fund or insurer
• have a particular need for it, for example, you have children or dependants, or work in a high-risk job

Insurance for people under 25

Insurance will not be provided if you’re a new super fund member aged under 25 unless you:

• write to your fund to request insurance through your super
• work in a dangerous job – you can cancel this cover if you don’t want it.

Use our Life insurance calculator

Work out if you need life insurance through your super and how much cover you might need.

Superannuation and insurance can be complex. If you need help call your super fund or speak to a financial adviser.

Pros and cons of life insurance through super

Pros

• Cheaper premiums — Premiums are often cheaper as the super fund buys insurance policies in bulk.
• Easy to pay — insurance premiums are automatically deducted from your super balance.
• Fewer health checks — Most super funds will accept you for a default level of cover without health checks. This can be useful if you work in a high-risk job or have health conditions that can make it difficult to get insurance outside super. Check the product disclosure statement (PDS) to see the exclusions and treatment of pre-existing conditions.
• Increased cover — You can usually increase the amount of cover you have above the default level. But you’ll generally have to answer questions about your medical history and do a medical check.
• Tax-effective payments — Your employer’s super contributions and salary sacrifice contributions are taxed at 15%. This is lower than the marginal tax rate for most people. This can make paying for insurance through super tax-effective.

Cons

• Ends at age 65 or 70 — TPD insurance cover in super usually ends at age 65. Life cover usually ends at age 70. Outside of super, cover generally continues as long as you pay the premiums.
• Limited cover — The amount of cover you can get in super is often lower than the cover you can get outside super. Default insurance through super isn’t specific to your circumstance and some eligibility requirements may apply.
• Cover can end — If you change super funds, your contributions stop or your super account becomes inactive, your cover may end. You could end up with no insurance.
• Reduces your super balance — Insurance premiums are deducted from your super balance. This reduces your savings for retirement.

Check your insurance before changing super funds. If you have a pre-existing medical condition or are over age 60, you may not be able to get the cover you want.

How to check your insurance through super

To find out what insurance you have in your super you can:

• call your super fund
• access your super account online
• check your super fund’s annual statement and the PDS

You’ll be able to see:

• what type of insurance you have
• how much cover you have
• how much you’re paying in premiums for the cover

Your super fund’s website will have a PDS that explains who the insurer is, details of the cover available and conditions to make a claim.

If you have more than one super account, you may be paying premiums on multiple insurance policies. This will reduce your retirement savings and you may not be able to claim on multiple policies. Consider whether you need more than one policy or whether you can get enough insurance through one super fund.

Before buying, renewing or switching insurance, check if the policy will cover you for claims associated with COVID-19.

When reviewing your insurance in super, see if there are any exclusions or if you’re paying a loading on your premiums. A loading is a percentage increase on the standard premium, charged to higher risk people. For example, if you have a high-risk job, a pre-existing medical condition or you’re classified as a smoker.

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Jobs down but construction work improving 

November 4, 2020  

Colin Brinsden, AAP Economics and Business Correspondent 
(Australian Associated Press) 

Employment and wages growth continues to weaken despite some positive signs in the economy, with the construction sector expanding for the first time in two years. 

Payroll jobs fell 0.8 per cent in the fortnight ending October 17 following a 0.9 per cent drop in the previous two weeks. 

Compared to the beginning of the coronavirus pandemic in March, payroll jobs have fallen 4.4 per cent. 

Wages also fell by 2.1 per cent in the latest reported fortnight to be down 5.1 per cent since March. 

At the same time, retail trade fell 1.1 per cent in September, the Australian Bureau of Statistics has found. 

However, retail turnover jumped 6.5 per cent over the September quarter, a solid result for the economic growth calculation due in December. 

“This confirms that outside of Victoria, where volumes fell 4.2 per cent as a result of the lockdown, the recovery in household spending is well underway,” BIS Oxford Economics chief economist Sarah Hunter said. 

Cutting the cash rate to a record low 0.1 per cent on Tuesday, Reserve Bank governor Philip Lowe said the economic recovery is up and running and the September quarter national accounts will show positive growth. 

The construction industry is another sector that appears to have turned a corner, buoyed by house building and less pronounced declines in apartment and engineering works. 

The Australian Industry Group/Housing Industry Association performance of construction index rose 7.5 points in October to 52.7, indicating a mild expansion in the sector. 

The index has breached the 50-point mark for the first time since 2018. 

HIA executive director Geordan Murray said low interest rates, government grants and other fiscal stimulus measures were lifting demand for detached housing. 

“These are positive signs that policy settings are working to generate employment throughout the initial phase of the economic recovery,” Mr Murray said. 

Dr Lowe said with Australia facing a period of high unemployment, the central bank was committed to doing all that it could to support the creation of jobs. 

The cut in the RBA’s cash rate would save more than $30 a month on a $400,000 variable rate mortgage if passed on in full by retail banks. 

But the Commonwealth Bank, the nation’s largest retail lender, has instead cut its fixed-rate home loans and some business loan rates and left its variable rate unchanged. 

The other three major banks have remained silent. 

However, a handful of smaller banks have cut their variable rates from between 0.10 per cent and 0.20 per cent with immediate effect.

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Big spend as Frydenberg goes for growth

October 7, 2020

Colin Brinsden, AAP Economics and Business Correspondent
(Australian Associated Press)

Despite Josh Frydenberg’s gigantic spend-up, his second budget contained very few big surprises after the carefully crafted run-up to the treasurer’s big night.

In the past week or so, big, multi-billion dollar initiatives have been announced on a daily basis, from an apprenticeship initiative to giving the regions and tourism a cash injection.

The bringing forward of already legislated tax cuts, due in 2022, has been flagged for months.

Even so, the spend-a-thon that will see the budget deficit balloon to a record $213.7 billion and government debt exceed $1 trillion for the first time is aimed at digging the economy out of recession and getting people back into work.

The budget is forecasting a huge acceleration of economic growth in the next financial year, from a contraction of 1.5 per cent in 2020/21 to brisk 4.75 per cent expansion.

From there on growth is expected to hum at a rate of 2.75 per cent to three per cent, something that has not been seen for a while.

There is also hope that unemployment is not far from its peak, with Treasury now predicting a top of eight per cent later this year, rather than nine per cent, and by 2023/24 falling to 5.5 per cent.

But there is a big assumption to this somewhat healthier outlook, given how deep Australia’s first recession in three decades has been.

It relies on there being a COVID-19 vaccine by the end of 2021.

Mr Frydenberg explained if a vaccine is found six months earlier, that would give a $34 billion boost to the economy.

But he also warned if there was a second or third wave of virus cases in Australia, that could hurt the economy by $55 billion.

“There is a lot of uncertainty in this economic environment, it’s an unprecedented time,” he told reporters.

“We are leaving no stone unturned to get access to the vaccine.”

In the meantime, the government is racking up a huge bill trying to keep life on an even keel in these uncertain times.

Retail spending climbs 2.4 pct in June

July 22, 2020

Derek Rose

(Australian Associated Press)

Retail sales in Australia rose a solid 2.4 per cent in June, as people flocked to reopened cafes and restaurants and spent more on clothing in the first full month of trade since the lockdowns ended.

Turnover for the month rose to $29.7 billion and was up 8.2 per cent from a year ago, according to preliminary figures released by the Australian Bureau of Statistics on Wednesday.

The overall rise in June comes on top of a huge 16.9 per cent jump in May, which followed a record 17.7 per cent fall in April.

“Households seem to be transitioning to a ‘new normal’ of spending, where elevated retail spending replaces expenditure on travel and entertainment,” ANZ economists Adelaide Timbrell and Catherine Birch wrote in a research note.

Cafe, restaurant, and takeaway food service spending jumped more than 20 per cent for the second consecutive month but was still 17 per cent below the level in June 2019.

Clothing, footwear, and personal accessory spending gained 19 per cent, but remained six per cent lower from a year ago.

Food retailing rose 0.9 per cent, as a rise in supermarkets and grocery stores spending was offset by a fall in liquor retailing, the ABS said.

There was some evidence of stockpiling at the very end of June, particularly in Victoria, which has reimposed lockdowns in parts of the state.

St George Banking Group chief economist Besa Deda says the figures are encouraging, as retail spending represents a large part of economic growth.

But she cautioned that “the recovery that is underway is fragile, it is vulnerable to further shocks, and that’s related to consumer confidence.”

There might be further falls in July as pent-up demand subsides, but overall household good spending was well above pre-COVID levels, Sarah Hunter, chief economist for BIS Oxford Economics, said.

Household goods retailing fell in June but remains 23 per cent above June 2019 levels, the ABS data showed.

This confirms that consumers are substituting spending on services – particularly travel – towards retail goods.

“Looking ahead, overall spending is likely to remain elevated in the very near term, with households likely to continue to substitute retail goods for services (conversely, spending in cafes and restaurants will remain subdued),” Ms Hunter wrote in research note.

But the longer term will be more challenging, with the tapering of the JobKeeper and JobSeeker schemes expected to weigh on household spending from October, she added.

Job losses recently materialising in the construction and professional services sectors are also likely to be a drag on retail spending, Ms Hunter said.