by Olivia Long

I was asked a good question by a client who’s ready to establish their SMSF. What happens when she establishes her SMSF? Do the assets from her current super fund transfer over to her new one?

When a person decides to roll out of their existing fund to set up an SMSF it may either be a transfer of the entire balance of their existing superannuation account (and that account is then closed), or they may choose to just to roll out part of the balance of their superannuation monies, keeping open their account with their existing fund.

The rollover itself is simply a transfer of cash to the new SMSF either by electronic transfer, or by giving the new SMSF trustees a cheque for the value of their superannuation.

Many superannuation fund members have some form of insurance benefit attached to their account, and many people elect a partial rollover thinking it’s easier to keep their insurance rather than go through the hurdles of trying to obtain insurance elsewhere (especially when age is an issue and people are concerned about failing medicals).

What many people don’t realise is that insurance premiums within superannuation funds have had a significant increase in the past few years - some up to 80%.  Between account keeping fees and the insurance premium itself, it may be more cost effective to arrange direct insurance cover in the SMSF.

Another little known fact is that you can provide a certificate of currency from your existing superannuation fund to a new insurance provider, and simply transfer the benefit, with automatic acceptance and no need for medicals. Why wouldn’t you consider holding insurance directly if this is the case?

The government appears to agree with me. It is now a requirement that SMSF trustees consider their insurance needs as part of their overall SMSF investment strategy and document this consideration to be held on record for their fund.

Personally, I think there are two key benefits to super. One is the ability to fund your own retirement (after all, who wants to rely on the government?) Even better, is the ability to use your superannuation money to pay for life insurance to provide for your dependents upon your death.