SMSF trustees must act in the best interests of all fund members, including regularly reviewing the fund's investment strategy to ensure adequate insurance coverage is considered.
Key insurance options for SMSF members include life insurance, total and permanent disability (TPD) insurance, and income protection insurance, which protect against unexpected events and financial hardship.
Failing to consider insurance can lead to personal liability for trustees, financial instability for members, and potential regulatory breaches, risking penalties from the Australian Taxation Office (ATO).
Trustees should regularly assess insurance needs within the investment strategy and seek expert advice, such as from Kelly+Partners Private Wealth, to identify coverage gaps and enhance financial protection for members.
A Key Fiduciary Responsibility
Self-Managed Super Funds (SMSFs) have become an increasingly popular vehicle for individuals seeking greater control over their retirement savings. However, with the enhanced control comes increased responsibility, and trustees must ensure they are meeting all fiduciary obligations. One critical area often overlooked by SMSF trustees is the need to consider insurance for members as part of their fiduciary duty.
We explore the importance of considering insurance in SMSFs, the risks of neglecting this responsibility, and how to address these considerations effectively. It also highlights the benefits of seeking expert guidance to ensure compliance and protection of SMSF members.
SMSF trustees are legally required to act in the best interests of all fund members, ensuring that the retirement benefits of those members are maximized. Among these obligations is the requirement to regularly review the fund’s investment strategy, which should also consider whether the fund’s members need insurance coverage.
The Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations) explicitly mandate that trustees must consider insurance for fund members as part of their investment strategy. However, many trustees focus primarily on investment selection and growth, often overlooking the essential protection that insurance offers.
Insurance plays a vital role in protecting SMSF members against the unexpected. Some key insurance types that trustees should consider include: