What if the unthinkable happens?

August 13 |  5 minutes

Another financial year has come and gone, and with it you may have got a pay rise, thanks to your enterprise bargaining agreement (EBA) or as part of an annual review process. If you received a salary increase, and have income protection (IP) insurance through your Vision Super account, you may need to update your insurance to reflect your increased pay.

Vision Super allows you to make changes to your IP insurance without having to go through underwriting in the 60 days after a salary increase. All you need to do is log in online and update your insurance, or fill out this form and attach a letter from your employer confirming your new salary and the date you were notified of the salary increase. MLCL (the insurer) will automatically accept the increase in cover as long as it is not an increase of more than three units in a single financial year, or an increase to 16 units of cover overall (for an explanation of units of cover, you can read our IP factsheet).

Why do I need to update my insurance if I get a EBA pay increase?

It’s important for you to let us know if your salary changes, because your cover is based on a percentage of your salary.

If you ever need to claim IP insurance because you’re unable to work because of a serious illness, or an accident or injury, the amount you will be paid out will be either 75% or 85% of your current salary at the time of the accident/injury, or the amount you’re covered for – whichever is lower. This means that if you update your IP insurance in line with your pay, you’ll get the maximum you’re entitled to, and we’ll be able to pay out up to 75% or 85% of your income depending on the percentage you are covered for. Any amounts in excess of 75% of your income (to a maximum of 10% of your income) must be paid as a superannuation contribution to your Vision Super Saver account.

Income protection gives you peace of mind knowing that you can still cover the bills if you’re hit with an unexpected illness or injury. It’s designed to replace your lost income if you can’t work. This is especially vital if you’re self-employed or a small business owner, as you may not have sick leave or annual leave. And if have a family that relies on the income you earn, or have debt like a mortgage, you’ll need to make payments on even if you’re unable to work. Please note, waiting periods will apply.

For the further information on IP, refer to the relevant Insurance guide on our website. If you don’t have IP insurance and want help deciding if you need it, speak to a financial adviser.

What do you mean by beneficiaries?

A beneficiary is essentially the ‘heir’ to your super savings – the person or people who will receive your super if you die. The balance you have in your account, plus any applicable death insurance payment (if you have insurance through Vision Super) makes up what we call your “super death benefit”.

When you’re ramping up to retire, your superannuation starts to become front-of-mind. As you get older, your insurance death benefit generally decreases, but your balance becomes more significant, so you might need to check your beneficiary nominations and ensure they’re up-to-date. A binding nomination allows you to set up your estate as a beneficiary, meaning you can choose how super will be divided according to your wishes in your will.

But you might need more information on what a binding nomination is.

And with us to help you through it all, it’s not too hard! Just ensure your beneficiary nomination is up-to-date, remembering that you can always change it if need be. If you’ve chosen to create a will, did you know you can use it to stipulate in more detail how you want your superannuation funds divided? Then you just tell us that you’d like to nominate a binding beneficiary to your estate (by nominating your legal personal representative, who is the executor of your will). This way, Vision Super will pay your super to your estate, and it will be paid to your heirs according to your will.

But what is a binding nomination?

Binding vs non-binding (or “preferred”) nominations

There are two ways to nominate a beneficiary: you can make a binding death benefit nomination or you can make a non-binding (commonly referred to as “preferred”) beneficiary nomination. So, what’s the difference?

A binding death nomination

A binding nomination is the formal, legally binding way to establish a beneficiary. It means that Vision Super has to pay your death benefit the way you’ve specified except in special circumstances such as a court order. However, there are a few restrictions and rules surrounding binding nominations.

You can only nominate the executor of your will, called your legal personal representative (so that your money goes to your estate), your spouse, children or someone in an interdependent relationship with you, and you must nominate your beneficiary by filling in a nomination form, signing it, having it witnessed, and posting us the original (not a photocopy).

Your nomination is valid for three years from the date you signed the form, and to change a binding death benefit nomination, you’ll need to send us a new form. Sounds like a lot, but it’s a binding legal document and these measures are in place so you have peace of mind.

A non-binding/preferred nomination

You can nominate a non-binding beneficiary easily, by logging into your Vision Super account or by filling out a nomination form.

The process of nominating a non-binding beneficiary is simpler since you don’t need witnesses, but your nomination is only a preference and is not a binding legal document. This means that Vision Super can legally distribute your death benefit funds differently from the way you have nominated, particularly if you have dependents. Your nomination can also be contested if someone believes they have a stronger claim to your funds.

Financial advice

There are many aspects of super that can be complex, such as insurance and beneficiaries, and most of us aren’t experts. If you’re confused about how much insurance you need, or how to set up a beneficiary, let us help – generally this financial advice on a single super topic comes at no extra cost to our members. If you’d like to have a chat with us about how to make your savings grow, call us on 1300 300 820 Monday to Friday 8:30am to 5pm.

The nitty gritty

Please note, if you already have 16 units of IP cover or have had an automatic increase of 3 IP units this year, you are not eligible for an automatic increase as a result of your wage increase. To check how many units of cover you have, you can log in to your Vision Super account, or check your latest statement.

August 13 |  5 minutes

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