Super is easy to ignore, and small accounts are the easiest to forget. If your balance is under $6,000, a few rules apply that you should be aware of. Many people keep low-balance super accounts to hold existing life insurance policies, so it is important to understand these new rules and ensure your insurance stays in force.
Superannuation fund fees are capped if under $6000 balance
On balances under $6,000, your fund can’t charge more than 3% a year in administration and investment fees. If it does, the excess is refunded to you. This fee cap leaves out insurance premiums, though, and those still come out of your balance. This means that a small account carrying insurance cover can shrink faster than you’d expect.
ATO – Unclaimed Super
If your account has less than $6,000, hasn’t received a contribution or rollover for 16 months, and has no insurance attached, your fund has to send it to the ATO as unclaimed super. The money isn’t lost. The ATO can move it into another one of your accounts, or you can claim it back yourself. In the meantime, your fund is no longer investing it.
The insurance trap
Insurance is where people get caught out. Many accounts include life, total and permanent disability, or income protection cover. If nothing has been paid into the account for 16 months, the fund must cancel that cover, regardless of the balance, unless you’ve asked in writing to keep it. Most funds send reminders at 9, 12 and 15 months. If you miss them, the cover is cancelled, often without anyone noticing until they need to claim.
Are you under 25?
Younger members face one more hurdle. Since April 2020, new members under 25, or with a balance under $6,000, don’t automatically get insurance cover. So if you want insurance, you will need to ask for it proactively.
Your action plan
- Check the balance of all your super funds, and also check if you have insurance cover. If you want insurance, tell your fund you want to keep it, and keep contributing to that super fund. Some funds let you make that election once and have it stand indefinitely; others need it renewed, so ask which applies to you.
- If you hold an old account sitting with a past employer, you will need to consider seeking financial advice from a qualified financial adviser to determine if it is best to retain these funds or to consolidate into your main super product. Seeking advice is important to ensure your existing insurance cover is not cancelled and also to ensure actions taken are in your best interest.
Find out more on the ATO website: Inactive low-balance super accounts | Australian Taxation Office
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