What to consider before consolidating your super

How many jobs have you worked in your lifetime? If all of your employers have paid your superannuation correctly, you might have money sitting in several super funds.

There are approximately 30 million superannuation accounts in Australia and more than 40% of Australians have more than one super account. If you’re not sure whether you have multiple super funds, the Australian Taxation Office’s lost super website can help you find out.

Having more than one fund can mean you are paying additional administration costs and insurance premiums, which you can save on by consolidating your super accounts. But that could mean losing valuable insurance benefits you may need to access in the future. Particularly if you have a pre-existing disability, it is important to consider whether you should consolidate and if so, into what fund.

Do you have superannuation insurance?

Most Australian workers are covered through their super accounts for both death and total and permanent disability (TPD) insurance.  The law requires that super funds must provide this cover on an ‘opt-out’ basis, so the premiums are automatically deducted from your account unless you choose otherwise.

That cover provides an important financial safety net for workers and their families in case they die or cease work due to injury or illness.  While we may not like to think about the possibility of having a serious accident or illness, it's good for peace of mind to know you and your family can access insurance to help meet expenses in the event of unforeseen.

But many Australians don't actually know that they’re covered. 

Super funds are not required to proactively contact members, so people who are unaware they’re insured often don’t think to make claims.

Since we’ve been raising awareness about Australians’ rights to these benefits, we’ve had people come to us years after they’ve stopped work due to disability and we’ve put a claim in for them. Often our enquiries discover that a person can make multiple claims if they were a member of more than one super fund when they ceased work, even if they didn’t know they were covered.

Most super accounts provide ‘account based cover’ which means that the insurance will continue even if you or your employer are no longer paying super into that account, so long as the account remains open and there is enough money in the account to pay the premiums.  

What should I keep in mind if I want to consolidate my super?

Be aware that insurance cover will cease when an account is closed, so you should check that any super fund you’re looking to consolidate into will cover you for death and TPD insurance.

Someone with an existing condition such as multiple sclerosis, depression, anxiety or a bad back will likely struggle to get disability insurance if they were to approach an insurer directly. That makes super insurance cover particularly useful for them.

Unlike traditional insurance, insurance provided by super funds can cover all members of the fund in one policy without requiring individual health checks.  And the cover will pay for injuries or illnesses that existed before the cover started as long as you have met an ‘at work’ test.  That test generally requires that you have regularly worked in your normal job without restriction due to illness or injury since your cover started.

But because super insurers don’t do a ‘health check’ when your policy starts, it’s only after you make a claim that they will investigate whether you met the ‘at work’ test.  If the insurer says you didn’t meet that ‘at work’ test, it may decline your claim on the basis that it arose from a pre-existing injury or illness which is excluded.  If that occurs, you may have grounds for appeal, and we have had success in challenging insurers’ denials on that basis.

So it can be hard to know what cover you have with any particular super fund before you make a claim.

What should you do before consolidating your super?

Consolidating your super can save you money and make it easier to keep track of how your super is performing. But you could risk losing insurance cover that you may not be able to get again, particularly if you have a pre-existing injury or illness.

If you have a pre-existing disability, it’s crucial that you get a copy of the Product Disclosure Statement (PDS) and check whether you satisfy the fund requirements for full cover. If you’re not sure, it’s a good idea to speak with a lawyer.

It’s also important to keep in mind that while you may have multiple insurance benefits if you have a number of super accounts, some super insurance policies will say you can only claim if you haven’t claimed (or aren’t eligible to claim) on another policy. Again, you should read the small print and also to speak to a lawyer to help you understand your rights.

TOPIC: Superannuation
RELATED LEGAL SERVICES: Superannuation claims

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Josh Mennen

Maurice Blackburn Sydney
Josh Mennen is a Principal in the Superannuation and Insurance practice in Maurice Blackburn's Sydney office. He regularly visits Melbourne, Brisbane and Canberra, and is available to see clients in these locations as well. Josh practices in a range of jurisdictions, including State and Federal courts and tribunals. He has an impressive record representing consumers of insurance products in claims and disputes including life insurance, income protection and superannuation claims. Josh also represents victims of negligent financial planning and stockbroking advice, including through the compensation schemes such as the CBA Open Advice Review Program and the Macquarie Private Wealth compensation scheme. Josh works closely with various unions, and a range of consumer and other community support groups including the Leukaemia Foundation, the MS Society, social workers, financial counsellors and many more. He presents seminars and acts pro-bono for these groups and their members to increase consumer rights awareness, and give a voice to those disempowered by illness, injury and socio/economic barriers. Memberships & Accreditations New South Wales Law Society member Law Council of Australia’s Consumer Law Committee member Australian Lawyers Alliance member ALA Disability Insurance National Special Interest Group Executive Committee member ALA superannuation and insurance spokesperson Financial Planning Association planning and policy committee member ...

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