On 1 July 2021, the first ever national performance report comparing MySuper superannuation funds was released. This report, by the Australian Prudential Regulation Authority (APRA), was driven by widespread concerns around the need to protect working Australians’ retirement savings from being eroded by excessive fees or poor investment choices.
Most Australian workers are members of default super accounts, known as MySuper accounts. The report compares fees versus performance for MySuper funds over seven years, and found that thirteen of the big-name funds were shown to have failed the financial watchdog's performance test.
If you are a member of one of the poorer performing superannuation funds, you would have received a letter urging you to change super funds and where you invest your retirement savings.
While it’s great to see increased transparency on superannuation fund performance, you should also be aware that by switching super funds you could lose access to valuable life insurance attached to your superannuation.
MySuper accounts are required to provide insurance cover for death and total and permanent disablement (TPD), which usually means payment of a lump sum if you’re permanently unable to work due to injury or illness.
Some superannuation funds also automatically provide income protection benefits to MySuper members, paying a monthly disability pension if you’re unable to perform your normal job.
Automatic death and disability insurance has been an affordable safety net for many years, helping to provide insurance cover for thousands of workers who would otherwise be uninsured.
The cover provided in your superannuation fund depends on the specific terms of the relevant policy of insurance. Changing superannuation funds means signing up to new cover, with a new insurer, which could leave you uninsured or with sub-standard cover.
Some barriers to obtaining full insurance cover in a MySuper account include:
Depending on your individual circumstances, there may be significant advantages in remaining a member of the MySuper account that already has insurance cover in place without you having to meet ‘new member’ insurance requirements.
You should be particularly wary of switching super funds if, at the date that you seek to change your fund (and therefore your insurance cover), you:
While we welcome more transparency around superannuation funds’ performance, any advice to “switch funds” should come with a warning about the related risks of losing valuable superannuation life insurance.
The new online comparison tool will help you understand how your superannuation fund compares with others in terms of your retirement investment but it won’t provide guidance in regard to your insurance needs.
If you have ceased work due to injury or illness, please contact us and we can investigate your current insurance cover and help you lodge a claim. Call us on 1800 991 597 or start your free Super claim check now.
The above is general information only and we recommend that you obtain specialist financial advice about your insurance needs before changing super funds. Visit Industry Super for more information.
If you're unable to work due to illness or injury, you may be eligible to make a claim on your superannuation insurance. Your injury can be physical or psychological and doesn't need to be work-related. We can help you understand what options are available to you.