$5,000 Superfund insurance bill surprises Kiwi migrant

Superannuation insurance
Gen Hallot got a shock when she discovered an insurance policy she didn’t ask for had cost her thousands of dollars. (Photo: supplied)

08 August 2018

Susan Edmunds – Stuff

Gen Hallot got a shock when she discovered an insurance policy she didn’t ask for had cost her thousands of dollars.

When New Zealander Gen Hallot returned to New Zealand after many years working in Australia, she decided to leave her superannuation account behind.

It was not until she checked it again five years later that she realised she had lost more than AUD $,5000  (NZD $5,487) to life insurance fees – and she was paying AUD $109 a month for a policy she had not requested and did not need.

She checked her other superannuation account and found a similar thing had happened to the savings she had accrued from a waitressing job.

It’s being held up as a reminder to other New Zealanders who’ve left their savings across the Tasman that just forgetting about their accounts is not a good option.

In many Australian schemes, members are put in to group insurance policies, unless they explicitly opt out.

The Australian Productivity Commission report shows average premiums for default insurance are about AUD $300 a year but can be as high as AUD$2,000. The report also estimates total system-wide premiums collected from unintended duplicate insurance policies is around A$1.9 billion per year.

Jessica Ellerm, chief executive at Zuper superannuation in Australia, said insurance premiums would have more of an impact on New Zealanders’ super accounts, because many worked in the country for a short time and only amassed a small amount.

It is estimated there are about half a million New Zealanders living and working in Australia. But more people have been migrating from Australia to New Zealand in recent years – about 3,500 people moved east across the Tasman last year.

Superannuation insurance

There are benefits and drawbacks to moving your super savings across the Tasman. (Photo: Simon Maude/Fairfax NZ)

Moving your super savings across the Tasman

There are benefits and drawbacks to moving your super savings across the Tasman.

​Ellerm said, if those returning Kiwis were no longer contributing to their Australian schemes, that insurance cost would then erode their balances quickly.

“It’s likely to have a bigger effect on Kiwis because they forget about it or don’t get around to consolidating their savings across until they are in their late 20s and they don’t think about how much has already gone.”

It has been possible to move Australian superannuation to KiwiSaver since 2013.  But despite increasing numbers of migrants, the amount moved remains small.

The Financial Markets Authority KiwiSaver report last year showed there was $116.5 million transferred from Australian superannuation schemes to New Zealand in the year.

Michael Chamberlain, founder of KiwiSaver scheme Superlife, said people paying premiums on insurance should still be able to claim on the policies, provided they, or their families, knew they were there. “People take out insurance without knowing or forget about it, so if they die they don’t claim.”

He said there were some reasons why people might not want to transfer their savings – such as Australia’s lower tax rate on super savings – but many would want the convenience of combining their money in one place.

If someone was getting a good deal on insurance via their scheme, they might decide it was worth leaving it to retain that.

The Australian savings can’t be withdrawn for a first home once they are in KiwiSaver, but the returns made on that money can.

“But people don’t get up in the morning and think I’m going to sort my finances, so many never get around to it. Most people can’t be bothered,” Chamberlain said.

[Read the Stuff article].

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