Superannuation contribution and income protection

I understand when someone is on income protection and their employer pays it (reinbursed by insurance company), the 9% levy for superannuation applies. BUT when the income is paid directly by the insurance company (eg your position is made defendant) their are no superannuation payments because you are not employed and the insurance company is not your employer.

This seems crazy as it results in loss of superannuation (9% year) and future lifestyle support which the government promotes!

Is there any way around this? Any exemption? Who is best to talk to?
Many thanks

You can get income protection insurance within some superannuation funds which pays up to 75% of your salaray should you be unable to work as well as 10% of your salary as a Super Guarantee contribution. In addition to this, you can also get it linked to CPI so that it doesn’t lose value due to inflation should you be unable to work for an extended period. As a first step I would recommend that you see if your current fund offers this option.

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Thank you for response. I understand what you have said.

What I’d like to know or be directed to is :

  1. When income protection is paid by an employer (reimbursed by insurance company) they pay the super contribution.

  2. When income protection is paid by insurance company (ie. Your job is made redundant) you do not qualify for superannuation contributions (you get the money still just not towards super because you are not employed by the insurance company).

I’m in scenario 2 and I’d like my super contributed to (not by additional payments by me but by the 9% contribution required by law which I think must be your employer).

Who can I talk to to clarify this.

Hi @holidayoffer,

Thanks for raising this issue, which I’ve shared with our investigations team. Also, we recommend seeking financial advice before making any decisions as we don’t offer personalised financial advice.

However, I can help out with some general info that might point you in the right direction. Firstly, it’s true that insurers tend to treat ‘involuntary redundancy’ payments differently to other income protection payments. Many insurers offering income protection do not cover redundancy at all.

There are no exemptions that would force your insurer to contribute an additional amount into your super under these circumstances. They will pay the amount stipulated in the PDS, and under the conditions they have outlined. It’s up to people taking out the policy to check the terms, but of course it doesn’t happen that way in reality and it’s easy to miss details. I see your point about the damage missing these payments can do to your overall superannuation over the years.

In most cases, the payment for redundancy under income protection is for a maximum of three months. While it’s not what you wanted, you could make up the payments later or contribute what you can. I hope this helps, and if anyone else reading can add their experiences I’m sure that would also be of interest.