Changes to QSuper Accumulation Income Protection Insurance Waiting Periods
QTU, 21 May 2019
The QTU has been made aware recently that the QSuper Board has decided to change the Income Protection (IP) Insurance product for accumulation members. The QTU understands that QSuper has decided to make the following changes effective from 1 July 2019 to avoid significant premium increases to the current IP insurance product with a 14-day waiting period:
• A change in the default Income Protection waiting period to 90 (calendar) days or accrued sick leave whichever is greater; and
• Reduction in the default Income Protection Benefit Period from three to two years.
Please note these changes do not apply to income protection insurance for defined benefit members.
The IP waiting period change
As outlined above leaving the accumulation IP insurance waiting period at 14 days after sick leave is exhausted would have resulted in huge premium increases and would have over time had a significant impact on the retirement savings of members particularly those who may never make an IP claim and on those members with low balances.
The new default waiting period although much longer than the current one is consistent with those offered by many industry and retail funds.
The waiting period change will be significant for most QTU members in the QSuper accumulation account, particularly those with a low sick leave balance and either no access to or a low long service leave balance. The waiting period (as is the case now) can be covered by other leave which unfortunately for our members is limited to only long service leave.
Please note under the new policy for those members with enough sick leave to cover the waiting period there is no period of unpaid sick leave required before the commencement of the income protection benefit. The actual waiting period, before benefits can commence, will be the greater of accumulated sick leave or 30, 60 or 90 days. The default being 90 days
QSuper Member Communication
As with other significant changes to superannuation benefits, QSuper must communicate with members about these changes. A Significant Event Notice (SEN) will be sent to members from 17 May over a two-week period.
The QTU is strongly recommending QSuper accumulation members consider the following action to reduce the impact of the waiting period changes:
1. Have you undertaken the occupational rating process or personalised your insurance (e.g. extended their IP cover benefit period to a maximum of 5 years) since 1 July 2016?
If yes, and your current waiting period is 14 days after sick leave is exhausted, you will have a 30-day waiting period for IP after 1 July 2019. You will need to review your waiting period as 30 days may not best suit your circumstances e.g. if your sick leave balance is more than 90 calendar days you may wish to change to a 90-day waiting period which will have a lower premium than for 30 days. Waiting period changes can be made online by logging into your QSuper account.
2. If you have not occupationally rated your premiums the QTU is recommending that you consider doing this either prior to 1 July 2019 or soon after this date.
If you have a waiting period of 14 days after sick leave is exhausted and occupationally rate your insurance prior to 1 July 2019 your default waiting period after this date will be 30 days. As outlined above for some members a 30-day waiting period may not best suit their circumstances and they may need to change it.
If you undertake occupation rating after 1 July 2019 your default waiting period will remain at 90 days. For some members e.g. with a sick leave balance less than 90 days and/or no access to long service leave, they may want to reduce their waiting period to 30 or 60 days. Please note premiums for lower waiting periods are usually higher. Occupational rating and changing waiting periods can be completed online by logging into your QSuper account.
The QTU is not directing QSuper Accumulation members to take certain action other than review their current QSuper insurance. The QTU is recommending that members consider the above advice and they should contact QSuper and/or a financial adviser about their insurance arrangements to ensure any changes made take into account their own personal circumstances.
QTU members who have questions about these insurance changes should contact QSuper by phone on 1300 360 750 or email in the first instance.
QSuper members can make changes to their insurance policies e.g. undertaking occupational rating by logging into their online account (https://qsuper.qld.gov.au/).
Case Studies :
How the change in the waiting period may impact different members
Please note the following case studies have been developed based on fictional members and do not by design accurately reflect the circumstances of any QTU member.
The case studies are simplistic and do not consider a range of variables including:
- the salary increase that should be implemented from 1 July 2019;
- dependent family members;
- other insurance policies held by the member;
- other sources of income;
- total assets;
- and the expenditure and debts of these members.
QTU members should not use these case studies to make a final decision regarding their income protection insurance.
The QTU is recommending members consider the case studies but should contact QSuper and/or a financial adviser about their insurance arrangements to ensure any changes made take into account their own personal circumstances.
Case Study One
John is an Experienced Senior Teacher (EST) earning $101 000 per year. He is 40 years of age and has a sick leave balance of 15 weeks. He currently (pre-1 July 2019) has default income protection insurance with a waiting period of 14-days after sick leave is exhausted.
John’s current default income protection insurance costs him 1.042% of his salary i.e. $1052.42 per annum.
After discovering the proposed changes to the waiting period of the default income protection insurance, John decides to occupational rate his QSuper insurance in July and is rated as white collar. This reduces his insurance premiums to 0.70% of the Standard premium rate.
As he has 15 weeks of sick leave he decides to leave his income protection insurance at the new default waiting period of 90 days or accrued sick leave, whichever is greater. His new premium is .0.503% of salary i.e. $508.03 per annum. John is paying a lower premium because he has occupationally rated his insurance and has a longer waiting period for his income protection cover.
Case Study Two
Jenny is a classroom teacher and has been teaching for 5 years. Her salary is $84 000 per year (plus superannuation contributions). She is 28 years of age and has 3 weeks of sick leave.
Jenny has previously occupationally rated her insurance and has been rated as white collar. Her current income protection insurance costs her 0.440% of salary i.e. approximately $370 per annum.
After 1 July 2019 Jenny’s Income Protection insurance will have a waiting period of 30 days or accrued sick leave (whichever is greater) as she has previously personalised her insurance by occupationally rating her premiums. She decides to leave her waiting period at 30 days as she has only 3 weeks of sick leave. Her new premium is 0.624% of salary i.e. approximately $525 per annum.
CASE Study Three
Sue-Lyn is a head of department who has been teaching for 15 years. She is 38 years of age, has 10 weeks of sick leave and has an annual salary of $117 000.
Sue-Lyn currently has default income protection insurance with a waiting period of 14-days after sick leave is exhausted. Her current default income protection insurance premium is 0.949% of salary i.e. approximately $1110 per annum.
After 1 July 2019 her default income protection changes to a waiting period of 90-days or accrued sick leave (whichever is greater). Her new premium is 0.575% of salary i.e. $672.25. Sue-Lyn does not review her insurance and does not realise that her sick leave balance does not cover her new waiting and that she could reduce her waiting period to 60 or 30 days.
Case Study Four
Roberto is a senior teacher who has been teaching for 11 years and has a sick leave balance of 6 weeks and a long service balance of 14 weeks. His annual salary is
$97 297 and he is 35 years of age. He currently has default income protection insurance with a waiting period of 14-days after sick leave is exhausted. Roberto pays 0.811% of salary i.e. approximately $790 for his income protection insurance.
After 1 July 2019 Roberto decides to occupationally rate his insurance and he is rated white collar. He decides to leave his waiting period at 90 days or accrued sick leave (whichever is greater) as he has enough sick leave and long service leave to cover this period. His new income protection insurance premium is 0.3836% of salary i.e. approximately $373 per annum. Roberto’s premium has decreased because he has undertaken occupational rating and now has a longer waiting period.
Case Study Five
Frances is 54 years of age, is an Experienced Senior Teacher ($101 000 pa) but because she had to resign in the past to undertake family responsibilities and has recently had a serious illness she only has 2 weeks of sick leave. She has 15 weeks of long service leave. Frances currently has default income protection insurance with a waiting period of 14-days after sick leave is exhausted. It costs her 1.848% of salary i.e. approximately $1866 per annum.
After 1 July 2019 Frances decides to occupationally rate her insurance and is rated white collar. Due to her low sick balance she decides to change her waiting period from the default 90 days or accrued sick leave (whichever is greater) to 60 days or accrued sick leave (whichever is greater). She will use some long service to cover the waiting period if she has to make a claim and does not have enough sick leave at that time.
Her white-collar premium for a 60-day waiting period is 1.2446% of salary i.e. approximately $1250 per annum. Frances is now paying a lower premium because she has occupationally rated and has chosen a longer waiting period.