Further anatomy of a super fund
My last column “Anatomy of a super fund” discussed some significant changes at QSuper and some comments in relation to their investments and insurance.
The next week, I got two friendly calls from senior people at QSuper in relation to what I had written.
We agreed to differ on our opinion about their super safe investment practices for older people – I felt it is not the best choice for long term financial investment but they are happy with their choices. Time will tell.
The key point about QSuper though is that it is one of the best industry super funds around. It gives you a lot of investment flexibility and QSuper’s insurance offerings are either the best or one of the best of any industry super fund. There are aspects where I feel you can do better if you deal with a good financial planner and insurance adviser but you can also do worse if you deal with a bad financial planner or insurance adviser.
In those phone calls, the people from QSuper had an excellent point to share in that they had previously upgraded their default income protection from 2 years’ cover, which is what I wrote in the column, to 3 years’ cover. For the price, this is perhaps the best income protection insurance on the market. Because the price is so low, you need to be aware that it stops paying if you become permanently disabled, i.e. if you have a bad accident, it can happen that you don’t get any money. In such a case you only get your Total and Permanent Disability payout which may take some time to finalise. However, most claims are for temporary disability and those get paid.
A further good point they made was that if you upgrade your income protection cover from 3 years to 5 years or to age 65, your payments don’t stop when you are permanently disabled.
I personally much prefer cover that pays until age 65 as I have heard that about half of all money paid is to a relatively small number of people who are permanently disabled.
However, a quality policy that pays until 65 is a lot more expensive and may not be the choice of everyone. The important thing is that you know what the choices are and make an informed decision. By coincidence I spoke to a client in his early 20s this morning and he very sensibly decided to go with an age 65 income protection policy that I had found for him with OnePath which is owned by ANZ. I checked how much he would have paid if he had chosen QSuper rather than a top quality retail income protection policy such as the OnePath one, and discovered that in this case the QSuper policy was actually slightly more expensive!
A good retail policy can offer things that an income protection policy inside a super fund (as with QSuper) is by law barred from doing, so finding a policy that is better and cheaper by a trustworthy insurer is the holy grail for insurance agents. However, in practice the vast majority of people do not go to a good insurance adviser and for those QSuper does a truly excellent job.