It Depends – Which is better for my super? A reversionary pension or a binding death benefit nomination?17 January 2022 Topics: Estate planning, Professional advisers, Superannuation
In this edition of ‘It depends’, partner Scott Hay-Bartlem talks about which is better for your super: a reversionary pension or a binding death benefit nomination
Welcome to It Depends. Today, I’m talking about which is better, a reversionary pension or a binding death benefit nomination for my super.
What is the difference?
So, both a reversionary pension and a binding death benefit nomination say what happens to my super when I die. A reversionary pension says that my existing pension continues to somebody when I die. A binding death benefit nomination says what happens to all of my super when I die.
When should I use a reversionary pension?
Okay, so to have a reversionary pension, first, you need to be actually taking a pension, they only work on the existing pension. Secondly, you need to want your pension to continue to a particular person. So, if you don’t want someone to get your pension, you don’t use them. The third issue is that there is only a limited range of people that we can keep a pension going to. So, typically a spouse, sometimes dependent children.
When should I use a binding death benefit nomination?
A binding death benefit nomination is a separate document that says who gets my superannuation when I die. It can go to a spouse. It can go to my children. It can go to someone who is financially dependent on me, somebody in an interdependency relationship, or to my estate. And we can do different proportions, to different people with preconditions, and we can cascade and do all sorts of exciting and sexy things with them.
Can a binding death benefit nomination have the same effect as a reversionary pension?
If I’m drawing a pension, then we can either use a reversion or we can use a binding death benefit nomination to have the same effect, and as we’ll see in the next question, it can be more flexible. So, a binding death benefit nomination can go as far as saying my superannuation goes to a particular person as a continuation of my pension.
Which is better?
So, this is our It Depends. With a binding death benefit nomination, you have a wider range of people who can get your super. We can have it easier to change, while you have capacity it can be hard to change with reversionary pension. You don’t have to be in pension phase. You can have a binding death benefit nomination, work on an accumulation and or a pension account, and you can have more conditions. You can cascade, have alternatives, all sorts of different things. The really big issue is making sure you’ve thought it through and you’ve planned and it works in with your estate planning and your super strategy as a whole.
If you’ve got any questions about reversionary pensions and binding death benefit nominations, please call one of our superannuation or estates teams.
Thanks for watching It Depends.