New members sometimes complain about the fact that insurance premiums are automatically deducted from their accounts and default cover is given to them without asking for it.
This is because they fail to understand that a super fund operates under a trust structure with a corporate trustee bound by trust and statutory law to make decisions in the best interest of the beneficiaries (members). A super fund is not a bank and the trustees hold certain trust powers under the deed. In the case of insurance, the trustee has decided that it is in the best interest of the majority of members to provide automatic Death, Total and Permanent Disability, Terminal Illness and Income Protection insurance on an opt out basis.
Funds are also now required to offer Death/TPD cover under the MySuper regulations. Automatic cover provided by NGS Super has helped thousands of NGS Super members and their families in times of illness, accident and death. In many instances the recipients did not even know they were covered by insurance.
Following from the trust structure, the trustee is also empowered to make decisions about where a Death benefit is to be paid. In the case of a non binding Death nomination, the trustee will consider the nomination, the will, personal circumstances of the deceased and the statements of family members/dependants in reaching its decision. If, for example, a deceased member named his/her partner as preferred beneficiary 20 years ago and that marriage ended in divorce with the member starting a new family, the trustee is obliged to disregard the nomination and pay the benefit to current eligible dependants based on the deceased’s circumstances at the time of death. This can be an area of contention with various parties making claims on the Death benefit.
If a member wants absolute certainty regarding where her/his Death benefit will be paid, a valid binding Death nomination removes all trustee discretion. The trustee must pay the benefit to the dependants named in the valid binding nomination. It provides the peace of mind in knowing that the super or income stream balance will be paid to the named beneficiary. It’s a simple form which must be witnessed by two non beneficiaries and updated every three years to ensure that member circumstances have not changed.
A valid binding Death nomination must be made to a dependant: a spouse, child, any person financially dependent on a fund member or any person the member has an interdependency relationship with.
Some definitions that may be helpful
(a) a person legally married to the member(b) a person (same or opposite sex) with whom the member was in a relationship registered under a prescribed state/territory relations register, and
(c) a person (whether of the same or opposite sex) who although not legally married to the member, lived with the member on a genuine domestic basis in a relationship as a couple.
(a) a child of the member
(b) an adopted child, step child or ex nuptial child of the member
(c) a child of the member’s spouse, or
(d) someone who is a child within the definition of the Family Law Act 1975.
Interdependency: two persons have an interdependency relationship if they have a close personal relationship; they live together; one of them provides the other with financial support and one or each of them provides the other with domestic support and personal care.
An interdependency relationship can also exist if the two persons have a close personal relationship but because of physical, intellectual or psychiatric disability the other requirements for interdependency cannot be met.
A binding death nomination provides certainty and the form can be downloaded from https://www.ngssuper.com.au