Salary sacrifice Life/TPD

I currently have some Life and Trauma insurance through my employer super fund but it is not adequate for my needs and I do not have the option to purchase additional units through the fund. As a result, I am planning to apply for a Life/TPD policy through ING - their OneCare product.

I noticed they also offer a super account that is designed to be used solely as a vehicle for paying insurance premiums, i.e. not an accumulation fund. (I imagine other insurers may have similar offerings, too)

If my employer agrees to pay voluntary salary sacrifice contributions into the ING super fund, it seems to me that I can effectively save 40% on premiums after tax (given that I am in the 40% marginal tax bracket)... but this seems like a loophole. Am I missing something?

Are you happy with your employer super fund ? Why not just move your super to a more appropriate fund that does offer the level of insurance you are seeking ?

You should also consider implementing a portion of income protection via superannuation ...

Johnny,

The ING Life/TPD super option is really designed for the self employed.

As you are an employee you should use your existing super fund to pay for your insurance. You get the same tax benefits and you may even find that the insurance premiums are lower.

The insurance benefits in my employer super fund are significant and come at no additional cost, they just are not flexible (i.e. the level of insurance is a fixed multiple of my salary and there is no option to go out of pocket to purchase more cover). Management fees are also very competitive. So yes, I am happy with my employer super fund.

I would like additional cover because a) I am the sole breadwinner in my household and b) the cover through my employer fund ceases if I leave the company so I would like to lock in an "outside" policy with level premiums while I am still (relatively) young to ensure some continuity of coverage should my employment situation change.

Hi Johnny,

Let's start from the top...

First, I think you've done a typo as you would have Total and Permanent Disability inside your super not Trauma as trauma doesn't meet a condition of release for superannuation. This may have had something to do with you writing the post at 3:36am...(things are hazy for me at that time too!)

As Carlos suggested, you should find out if your employer fund offers Income Protection/Temporary Salary Continuance inside superannuation. Also see whether it is for 2 years or to Age 65.

Depending on the size of your employer they may be receiving discounts for the plan size and insurance, if you work for a small company (10 people) there may not be any discounts, check with your super fund as they will tell you when you call to ask them.

It's great that your employer is paying for your insurances! Though you have already realised the downside is b) you are young and you may change employment in the future...

a) you can still insure your partner as a homemaker for life, income protection and trauma, ING have a homemaker income protection policy!!!

Cheers,

Dan

PS Before making an insurance, superannuation and investment decision speak to your FPA registered Financial Planner.