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Reversionary pension nominations
On the death of a superannuation pensioner, the balance in their account must be dealt with by the Fund Trustees in accordance with provisions in the Trust Deed and current law. It is important for Members to ensure they understand the legislation and have made appropriate nominations and requests, and that the Trustees correctly understand their wishes. If nominations are not legally binding, any funds remaining in your pension account at the time of your death may be allocated to a person or persons other than your desired beneficiaries.
Upon the death of a member, the balance in an account may be paid out in a lump sum, or as a reversionary pension (if you so nominated when setting up your pension and the nomination you made is legal).
A reversionary pension is one that automatically continues following the death of a member, but is paid to a nominated ‘reversionary beneficiary’. If you select Yes in the Reversionary Pensions details screen, upon your death your pension will payments will be paid to the person you nominated in that section.
Although the ATO is currently considering clarifying legislation that is unclear at this stage, legal advice suggests you should make this nomination at the time your pension commences.
You may nominate anyone who is classified as a SIS dependent to be a reversionary pensioner, but note that the nominated person must be an SIS dependant at the time of reversion, otherwise the reversion nomination becomes ineffective. In addition, if you nominate a child, the child must, at the time of your death:
- be under 18 or,
- be between 18 and 25 and still financially dependent, or
- have a severe disability
If the nominee is not a qualified person at the time of your death, the benefit will be paid in a lump sum.
If your pension does revert to another party, that person assumes ownership of the pension. That does not necessarily, however, mean that they have unfettered access to the balance, but it does mean that the balance can only then be passed to persons entitled to inherit THEIR superannuation (i.e. their own dependants or estate). That could deny your desired beneficiaries a benefit. For example, if you remarried and your children are not your wife’s children, and you nominate your wife as your reversionary beneficiary, any residual monies in your account when she dies may pass to her children instead of yours.
Your Fund’s Trust Deed can impose additional conditions on the reversionary beneficiary. However, if you nominate a reversionary beneficiary when setting up your pension in Mclowd, you should be aware of the risks attached and verify that your Fund’s Trust Deed provides for potential changes in yours and your nominated beneficiary’s circumstances.