Q: Will withdrawing up to $20,000 under the early superannuation release rules impact my client’s insurance arrangements?
A: Withdrawing benefits under this new condition of release will generally not impact a client’s life insurance cover in their fund unless the withdrawal results in the full balance being withdrawn, which would result in the account being closed and the insurance cover being cancelled.
Note, under the ‘Protecting members interests first’ (PMIF) changes that apply from 1 April 2020, trustees must cancel any life insurances held for a member where their balance has been less than $6,000 at any time between 1 November 2019 and 1 April 2020 (unless member has elected to maintain their insurance).
Therefore, even where a member accessing their benefits causes their benefits to reduce to less than $6,000 they will not have their insurance cancelled so long as the value of their account balance was $6,000 or more at some time between 1 November 2019 and 1 April 2020.
However, in this case members need to be aware that the insurance premiums will continue to be drawn from their account and may further erode the balance of their account over time.