What are the benefits of a Reversionary Pension?

Tuesday, April 06, 2021

A Reversionary Pension can make up part of the Estate Planning for your retirement investments. Read on for valuable Reversionary Pension financial advice...

By Maher Digby Financial Planners Sunshine Coast 

In regard to Superannuation and Allocated Pension investments, we have discussed previously in our blog about utilising a Binding Nomination to elect the beneficiary of your investment so that it becomes a legally binding directive to the Trustee of the Superannuation Fund. Without a legally binding directive, either binding nomination or reversionary pension, then it is at the discretion of the Trustee as to how the monies are distributed, and is a significantly protracted process requiring additional paperwork and proofs.

A Reversionary Pension however means the investment transfers immediately to your nominee and without need for Trustee approval.

A key advantage of having a Reversionary Pension is to make the transition of investments and income payments upon your passing to be seamless for your spouse.  If you have a Binding Nomination to your spouse, your pension payments will be ceased until the appropriate transfer paperwork is completed and signed and the Trustee of the Superannuation Fund has given their agreement of transfer.

The government rules of who can be a nominee are the same for both a Binding Nomination and a Reversionary Pension:

  1. Your Spouse
  2. Dependent child – either under 18yrs , or financially dependent and under 25yrs, or a permanently disabled child
  3. Someone with which you have an “interdependency relationship”

In the case of a Binding Nomination you have an additional nomination option which is for your Superannuation monies to go to your Estate in which case your solicitor will manage this according to the wishes in your Will.

If your beneficiary is a child (within the rules) then it may be worth considering a Binding Nomination as this allows the additional option of a Lump Sum payout, in addition to the choice for leaving the investment as is and continuing Pension Payments to the child once the Trustee has agreed to the transfer.

In fact, you can have a Binding Nomination and a Reversionary Pension in place at the same time. One strategy could be having the binding nomination to the Estate and a reversionary pension to the spouse.  In this case the pension would revert immediately to the spouse on your passing, but should your spouse pass away in a similar time frame, the investment then goes to the Estate rather than being administered separately by the Trustee of the Superannuation fund.

As you can see this is a complex area of Estate Planning with tax implications, and there are many options depending on individual circumstances and family needs. It is wise to seek professional financial advice on these matters from an experienced financial planner. Please contact Maher Digby Securities Nambour for more details on these kind of Estate and Investment strategies for your retirement investments, and more invaluable estate planning advice. 

For more Information contact Mark Digby at Maher Digby Securities Pty  Ltd - Financial Advisers – AFSL No. 230559 – Ph: 075441 1266.  This document was prepared without taking into account any person’s particular objectives, financial situation or needs. It is not guaranteed as accurate or complete and should not be relied upon as such. Maher Digby Securities does not accept any responsibility for the opinions, comments, forward looking statements, and analysis contained in this document, all of which are intended to be of a general nature. Investors should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. We recommend consulting a financial advisor.