Significant Event Notice - September 2020

The cost of insurance cover will increase

Many super funds have announced material increases in premiums for Death, Total and Permanent Disablement (TPD) and Salary Continuance insurance. These premium increases have occurred due to a range of factors including increases in the number of claims, the rising incidence of mental illness claims and legislative changes which reduce the number of members eligible for insurance. The legal community has a higher incidence of anxiety and depression symptoms relative to other sectors. 

The number of claims lodged and paid to legalsuper members for TPD is at a high level. This number is expected to continue to increase due to the effect of COVID-19 and the economic fallout on the health and well-being of Australians. 

The number of members to pay premiums which fund the payment of benefits has reduced significantly. This is as a direct result of three specific Government reforms, which we have previously communicated to you: 

• Protecting Your Super (PYS) effective 1 July 2019; 
• Putting Members' Interests First effective 1 April 2020; and
• Early Access to superannuation in response to the COVID-19 pandemic effective 20 April 2020. 

The reduced pool of members paying premiums and the increasing cost of claims has resulted in higher premiums needing to be paid, to maintain the existing level of Death and TPD insurance cover provided through legalsuper to its members. 

legalsuper engaged Rice Warner to undertake an independent review of the proposed increases in premiums by OnePath (legalsuper's insurer) which involved them working closely with the insurer's pricing actuary to understand and query the methodology and assumptions used. Rice Warner concluded that OnePath's increased premiums were reasonable. 

legalsuper will soon commission a holistic review of its insured benefit in the context of the significantly changed insurance landscape. 

What options do you have?

Death and TPD insurance exists to provide increased peace of mind by providing additional financial support for you and your dependents in the event you die, become terminally ill or totally and permanently disabled. The amount of insurance that is appropriate for you will vary depending on your personal circumstances and will change through your life. 

If you want help with checking the level of insurance that may be appropriate for you, our website includes calculators to indicate how much insurance you may need. Visit legalsuper.com.au/insurance-needs 

Most members will have been allocated a 'default' level of Death and TPD insurance on joining. The amount of insurance varies by age. By way of example, members aged 25 to 44 may currently receive default Death & TPD cover of $440,000 for an insurance fee of $7.80 per week. The amount of cover varies as you get older. A tax deduction arises in respect of insurance fees and so the net amount deducted from your account will be $6.63 per week ($7.80 per week less 15% tax). 

For self-employed members, the default level of Death and TPD insurance is $250,000 and insurance fees vary by age.

Given the increase in insurance fees, the options you have include the following: 

• Take no action. Any insurance you now have will continue. Your insurance fees will increase as set out below.
• Increase your insurance. Your application to increase your insurance is subject to acceptance by the insurer.
• Reduce your insurance. You can apply to reduce your insurance at any time.
• Cancel your insurance. You are able to cancel your insurance at any time. Insurance fees will cease.

What is changing

1. Increased insurance fees for Death and TPD Insurance cover
From 1 November 2020, insurance fees for Death cover and TPD cover will increase for all members by 35.6%.

If your Death and TPD cover (or Death Only cover) is unitised insurance cover, the new weekly fee per unit of cover, from 1 November 2020, will be:

• $2.64 Death & TPD (previously $1.95)
• $1.86 Death Only (previously $1.37)

If you have fixed insurance cover, the new insurance fee continues to depend on your age and gender. The fixed insurance cover fees that will apply from 1 November 2020 are shown in table 1 below.

2. Increased insurance fees for Salary Continuance cover
If you have applied for and been issued Salary Continuance cover, the level of increase in insurance fees, from 1 November 2020 is shown below:

The increased insurance fees continue to depend on your age, gender, chosen Waiting Period, chosen Benefit Payment Period and any loading applied by the Insurer because of factors such as your health or occupation. The Salary Continuance insurance fees that will apply from 1 November 2020 are shown in tables 2, 3 and 4 below.

Why has the cost of cover increased?

legalsuper has partnered with OnePath Life Limited (OnePath) (ABN 33 009 657 176), (AFSL 238341) ('Insurer'), for the provision of our group insurance since 1 October 2005. Since that time, this is only the second insurance premium increase. The last increase was four years ago in October 2016. Many other super funds have passed on several premium increases in that same timeframe. 

We comprehensively review our insurance offer every three years and continually monitor all aspects of our arrangements with OnePath. 

Our core focus during these reviews is to optimise overall benefits to our members and continue providing a competitive and sustainable insurance offering. 

Having completed the most recent review, legalsuper will continue with OnePath, under the arrangements as set out below

The importance of insurance

Your legalsuper insurance offers you the flexibility to change your cover to suit your needs at different life stages. You have the option to apply to increase, decrease or cancel your cover at any time. 

You should consider that insurance is not 'set and forget' and that you will derive the most benefit from your cover by continually assessing important milestones in your life related to your career, your health and your personal circumstances, for example marriage, children, divorce, mortgage, etc. 

You can read more information about your insurance options in the current legalsuper Superannuation Product Disclosure Statement (PDS) and Employer Sponsored Super & Personal Super Additional Information.

New insurance fees for fixed insurance cover

Effective 1 November 2020

Fixed insurance cover applies to members of the Personal Division as well as to Employer-sponsored members who elect to switch from unitised cover to fixed cover. Your insurance fee depends on your age, gender, chosen Waiting Period, chosen Benefit Payment Period and any loading applied by the Insurer. Expand the table below to see what an annual insurance fee per $10,000 of fixed cover will be.

New insurance fees for Salary Continuance cover

Effective 1 November 2020

Investment fees change depending on your age, gender, Waiting Period and Benefit Payment Period. Expand the tables below to see what an Annual insurance fee will be for a $100 Monthly Benefit for the appropriate Payment Period. If you are unsure what your Waiting Period or Benefit Period is, you can log in to MemberAccess to find out. 

Risk Profile Changes

The ASFA Standard Risk Measure for the Balanced index investment option has been adjusted

Change of manager for the Balanced Socially responsible investment option

The investment manager for the Balanced Socially responsible option has changed from AMP Capital to Pendal Group. 

The Balanced Socially responsible option was until recently invested in AMP Capital's AMP Capital Ethical Leaders Balanced Fund. Due to concerns with investment performance and recent reports about culture at AMP, legalsuper has terminated AMP Capital and transferred the investment into the Pendal Group's Sustainable Balanced Fund. 

As a result of this change, there has been a corresponding change in both the return objective and the strategic asset allocation for this option. 

Return objective changes

 Effective 1 November 2020, the return objectives of the following investment options have been updated.

Return objective (pa, over rolling 10-year periods) net of all fees and taxes except the weekly $1.30 administration fee.

Asset allocation changes

Effective 1 November 2020 

Asset allocation is the combination of different asset categories or classes, such as Australian shares, overseas shares, fixed interest and cash. The investment return and risk of an investment option are largely determined by its asset allocation. The following changes will be made to each option: 

• Strategic asset allocation changes in line with current portfolio strategy; 
• The permitted ranges for some asset classes have also been adjusted.

Details for each investment option are below:

Increase to the Administration fee rebate threshold

In July 2009, legalsuper introduced an 'Administration fee rebate' such that administration fees charged by legalsuper were capped for average account balances in excess of $350,000.

 The threshold from which the rebate applied has not changed since its introduction in 2009. 

If your average account balance* at the end of a financial year exceeds $350,000 during the entire financial year, legalsuper caps the total combined amount of administration fees (including the DIO Asset fee, if applicable) and DIO account fee (if applicable) so that you are only charged administration fees up to that $350,000 average.

 Where the fee cap applies, any excess fees will be rebated effective 1 July of the next financial year and the rebate will be shown on your next annual statement. 

If you exit legalsuper after 30 June, but before the fee cap is applied, you will receive the fee cap rebate as an additional payment. 

Changes effective 1 November 2020 

1. The 'Administration fee rebate threshold' will increase to $450,000.
   This means that, for the 2020/21 financial year, the 'Administration fee rebate threshold' will be $350,000 up to 31 October 2020 and then $450,000 from 1 November 2020. 2. 
2. The 'Administration fee rebate threshold' will be indexed annually
   From 1 July 2021 in accordance with the 'All Groups Consumer Price Index (CPI)'. The table below shows the treatment for the 2020/21 and 2021/22 financial years:

*The fee cap does not apply if your account with legalsuper is closed on or before 30 June during that financial year.