Estate planning options for your Pension account

11 July 2023

Estate planning isn’t always the most comfortable topic to think about, but it is a very necessary one. And that’s especially true when it comes to your Pension account.

If you don’t make a nomination for your super, the Trustee is obliged to distribute any funds according to superannuation legislation – generally to your dependant/s or legal personal representative.

This means that, depending on your personal family situation, your money might not be paid exactly how you would have wished. So, what are your options?

Reversionary beneficiary nomination

A reversionary beneficiary nomination allows you to nominate one person to continue to receive your Brighter Super Pension account benefit after your death.

They can choose to either take the money as a lump sum or continue to receive regular payments.

There are, however, limitations on who you can nominate. You can nominate your spouse, but you generally cannot nominate your adult child over the age of 18. The only exceptions are if your child is under the age of 25 and is financially dependent on you, or if your adult child meets specific disability requirements.

You can also nominate someone who isn’t a spouse or child if they have an interdependency relationship with you or are financially dependent on you.

You can nominate or cancel a reversionary beneficiary at any time using the Reversionary Beneficiary Nomination Form available at brightersuper.com.au/forms. We recommend talking to us before nominating someone, as the pension payment may affect their taxation situation and/or Centrelink entitlements. More details can be found below.

If you have more than one Brighter Super Pension account, you will need to make a separate nomination for each – although they can be for the same person. Any funds in a Brighter Super Accumulation account cannot be covered by a reversionary beneficiary nomination.

Death benefit nomination

Making a death benefit nomination allows you to choose one or more people to receive your super as a lump sum. You can include your Brighter Super Pension account(s) and any funds you have in a Brighter Super Accumulation account.

There are three types of nominations you can make:

• Binding death benefit nomination – this is binding on the Trustee, so we must pay your benefit according to your nomination. The only exception would be if it is no longer a valid nomination at the time of your death – this generally means that someone you have nominated no longer meets the definition of a dependant. This nomination expires after three years, so you will need to remember to renew it regularly. Your nomination will also become invalid if any person nominated as your dependant dies or ceases to be your dependant.
• Non-lapsing death benefit nomination – this is the same as a binding death benefit nomination, except it does not expire. However, changes in your circumstances, such as the breakdown of a marriage or de facto relationship, or the start of a new one, may make it invalid. We recommend that you regularly review your death benefit nominations.
• Preferred beneficiary nomination – this isn’t binding on the Trustee, so while we will consider it when making a decision on who should receive your benefit, we do have to consider other factors, such as superannuation legislation and the personal circumstances of your dependants.

You can make a preferred beneficiary nomination at any time through Member Online. However, you must use the Binding Death Benefit Nomination Form to make a binding or non-lapsing death benefit nomination.

Who can I nominate as a beneficiary?

A death benefit nomination tends to provide more flexibility than a reversionary nomination in who you can nominate to receive your benefit.

You can nominate anyone who meets the definition of a dependant for superannuation purposes:

• Your spouse – married or de facto.
• Any child – including stepchildren, adopted children, ex-nuptial children, or anyone who fits the definition of a child under the Family Law Act 1975.
• Any person with whom you have an interdependency relationship – defined as someone you have a close personal relationship with, you live together, and one or each of you provides the other with financial and domestic support and personal care.
• Any person who was financially dependent on you at the time of your death.

You can also choose to nominate your legal personal representative, such as the executor of your Will or the administrator of your estate. They can then distribute your super benefit according to your Will.

What tax is payable on a death benefit?

Several factors play into how much (if any) tax your beneficiary pays on the super they receive as a death benefit, including the following:

• Both your and their age at the time of your death.
• Whether they are a dependant for tax purposes (this is the same as a dependant for superannuation purposes with the exception of children aged 18 or over, who are classed as non-dependants).
• The tax components (more information on that below).
• How the benefit is paid. 

The table below shows what tax is payable for different scenarios. 

What are taxable and tax-free components?

When your super is in the accumulation phase, it is divided into taxable and tax-free components.

The tax-free component includes after tax contributions, while the taxable component includes employer and salary sacrifice contributions, voluntary contributions you have claimed a tax deduction for, and investment earnings.

When you move your money from an Accumulation account to a Pension account, the ratio of tax-free and taxable component remains the same. 

We’re here to help

Further information is available in our Death benefits info sheet and the Pension accounts Product Disclosure Statement.

Our superannuation specialists and financial advisers are always here to help you.

If you would like to discuss your options, please call us on 1800 444 396 or complete our online contact form