Huge change coming July 1: what you need to know
More than three million Australians could be left stranded without life insurance on July 1 when a little-known but significant change to superannuation is enforced.
Most are unaware their superannuation has a default life insurance included in the fund. And from the first day of the new financial year, super accounts that have been inactive for 16 months will have their default life cover switched off.
More than 50 per cent of Aussies have no idea these changes are coming, while a staggering one in four have no idea if they even have life insurance attached to their super, according to data from the Association of Superannuation Funds of Australia (ASFA).
"This legislation has been introduced for very good reasons," says ASFA chief executive Martin Fahy.
"However, the time frame for implementation has meant it has been challenging for superannuation funds to engage their members to ensure they understand the consequences of the changes in just a few short months."
Most Australians have life insurance included in their fund - more than 85 per cent - but only 67 per cent of those surveyed believed they did, with the remaining third saying they were certain they did not have that insurance in place.
Knowledge about super is notoriously low in Australia.
The study showed one third tend to not open letters and emails from their super funds, which means one in four Aussies don't even know what their balance is, and 44 per cent don't know what insurance they currently have through their super.
"We already know Australians are not highly engaged with their superannuation, from the balance to the insurance products they hold," Dr Fahy said.
"This study demonstrates that the problem only becomes more acute when looking at those Australians most likely to be impacted by the changes."
The high number of Australians who hold insurance with their fund provides an important safety net in case the worst happens, Financial Services Council chief executive Salle Loane said.
"The Protecting Your Super changes will help reduce account erosion through the additional fees and insurance that come along with unintended duplicate accounts," she said.
"But this is also a timely reminder to check your super and make sure you have the right insurance for your circumstances.
"The easiest way to know if you're affected is to open and read any letters, emails or SMS messages you receive from your super fund, but if you're not receiving those it's important you identify the fund and make contact."
Those who are confused about the changes are encouraged to visit timetocheck.com.au where they'll be able to find out whether they will be affected.
A survey of more than 3500 young Australians revealed nearly half don't know how super works, and a little less were unsure how much they had in their fund.
The survey was conducted by Student Services, the sister company to a new fund, Student Super, launched this week that doesn't charge fees to members who have less than $1000 in their fund.
Students commonly have multiple casual and part-time jobs before they enter the full-time workforce.
And if each is with separate funds, the fees can rise fast.
Student Super says fees could be as high as $1200 if the individual had four different jobs with different accounts.
"Students can have as many as six different employers before they turn 25," Student Super chief executive Andrew Maloney said.
"But because they're usually not thinking about their long-term financial goals, they'll go with whatever the default super fund is each time."
Nearly 70 per cent of students surveyed said they simply used the default super their employer had set up for them.
"What they don't realise is that they're paying duplicate fees with each fund, which can eventually whittle their super down to nothing," Mr Maloney said.
"That's a whole decade's worth of contributions that could make a real difference to their super balance down the line."