by Abra Chowdhury
A reversionary pension is a superannuation income stream that will, on the death of the pension owner, automatically continue to a nominated beneficiary. The beneficiary must meet the SIS definition of dependent both at the time of nomination and when the pension reverts.
A valid reversionary pensioner nomination will generally take precedence over all other death benefit instructions, making it a simple and powerful estate planning tool.
Nominations are usually done at pension commencement, but can be added at a later date. Be sure you understand any Centrelink implications before making changes.
Reversionary pensions are also treated more leniently for the $1.6 million transfer balance cap, with the value not counting towards the recipient’s cap until 12 months after death of the primary pensioner, compared to non-reversionary pensions which count immediately.
A key estate planning consideration is that death benefit income streams can never be commuted back to the accumulation phase – they can only be taken as a lump sum or rolled over to another death benefit income stream.
As always check the trust deed of your SMSFs to ensure there are no overriding provisions.