Scams and Cons
This week I had an email from the Metric Wealth HR Department. Apparently, I had $376 of underpayment due to me from the last tax year and a statement of this was attached to check.
This was very intriguing, especially as I don’t have an HR department.
Now as scams go, this one was reasonably obvious, but had it come through to me while working in a bigger organisation, it was glossy enough to attract a casual click.
Who knows what was in that attachment but its now off into the trash.
Pandemic conditions, especially with the multitude of cash payments from welfare and governments are seeing an increasing number of sophisticated scams popping up.
Last year, Australian’s lost $851 million dollars to scammers – a record amount. (Although still not a patch on Australia’s not so proud gambling losses - $24 billion. An unwanted world record.)
Those with Supers and investments (which is most of you reading this) are prime targets.
In a financial planner discussion forum (yes, such places exist for us to discuss exciting trends like Division 293 taxation notices) another planner shared the below, that his client had been sent. Using imagery from a genuine brochure by reputable fund manager Vanguard, they’d created a fake fixed interest account paying over 7% per annum. Who wouldn’t want that in a low interest world?
No matter how high our email security settings, we will all get a few slip through.
If you get something that’s borderline and you’re not sure, then call me – we’ll quickly do a screen share and look at it together (please don’t forward it!)
Financial advisers have a highly tuned scam detection radar, we’re naturally cautious people as we’ve had many dubious pitches to us over the years I was once pitched a fund that invested in a scheme run by Bernie Madoff. I sidestepped that although the returns looked amazing.
If it seems too good to be true – it probably is.
Upcoming Changes to Income Protection Policies
Insurance companies make a fair amount of money on Life insurance. This is because most people will hold life cover until they retire or have cleared their mortgage and then cancel without ever claiming. Longer life expectancies have also factored into this.
However, one type of policy where claims have increased significantly in the past 20 years is income protection. As medical understanding of illnesses regarding mental health has increased claims in this area and the generous wordings of older policies has meant that payouts have lasted longer.
In short, income policies in their current format are unsustainable and the regulator has worked with life companies on the rules surrounding them to ensure there is not a complete collapse of the structure in the future.
New government regulations have been introduced that will reduce the benefits available on new income protection policies written after 1 October 2021, mandated by the Australian Prudential Regulation Authority (APRA).
Those who hold cover via a group insurance scheme – such as bundled insurance in an industry fund or company scheme – will be affected by these changes.
If you currently have a standalone comprehensive policy, or can get one in place by 1 October 2021, you will maintain your existing higher benefits.
From October 2021, however, these extra benefits will not be available on new polices, due to the changes
The changes include:
Income replacement ratios to be reduced to 70%, from 75% currently.
Currently if you earn $100,000 per annum, you can obtain income replacement up to $75,000 per annum. From October the maximum will be $70,000.
Income to be calculated on last 12 months income only, compared to some current policies offering highest 12 months income in the last 2 or 3 years.
When you make a claim on income protection, the insurance company – depending on their own policy rules – will normally take your best 12 consecutive months of earnings over a 2 or 3 year period, when ensuring you can claim the full benefit of your cover.
So, for the client below who averages $100k over three years and makes a claim – they can use their best 12 months earnings from the 2020 year to verify their claim.
Under new rules, the claims will only look back over 12 months – if this were a bad year, (hello lockdowns) and they only earnt $50,000 – the most they could claim is $37,500 per year.
This is a massive kick in the teeth for business owners, or those with bonuses, with variable income and also those returning to work after career breaks or for child care.
Long benefit periods, such as to age 65, to be managed to maintain a motivation to return to work. This may include changing from “Own Occupation” to “Any Occupation” definition after 2 years on claim.
After 5 years, your benefit may be cut if it is determined you can return to the workforce in ‘Any’ suitable role you could be trained for, even if it wasn’t your job pre-injury.
Furthermore, life companies can now reassess your occupation every 5 years. If you’ve changed jobs from being an accountant to being a lion tamer – expect a hefty premium increase.
Action to take
Income Protection is the most valuable of all insurance covers – the loss of a salary can happen quickly and as many as one in four of us will have to take an extended period off work before retirement.
These change will affect existing group and industry super policies, so it is more vital than ever to have your own income protection polices and not rely on your Superfund.
These changes have unsurprisingly not been heavily publicised by the life companies as you can imagine!
Email hello@metricwealth.com or call us on 1300 50 20 30 for a complimentary review of your insurance cover.