Who gets your superannuation?

Chances are you have many years to enjoy your super savings but you need to consider what happens if you die before much of your super remains unspent. That’s why it’s important to formally nominate the people you want to receive your super death benefit.

This is particularly the case if you have kids from an earlier marriage or a blended family with a new partner.

What is a super death benefit nomination?

A binding super death benefit nomination is simply a formal, written instruction to your super fund trustee telling them who you would like to get your remaining super (including proceeds of life insurance paid into super) and/or your income stream (pension) if you die. It can either be binding — giving them no choice but to follow your wishes — or non-binding — leaving your trustee with the final say.

You can’t leave your super to just anybody. There are strict rules about who you can name as beneficiaries. The first option is to choose one or more dependants which can include:

  • your spouse or de facto, including a same-sex de facto
  • your kids, either from your current relationship or a previous relationship
  • people who depend on you financially; or
  • people with whom you have an “interdependency relationship”, such as someone who lives with you and gives you financial and domestic help, even if they’re not related

The other option is to nominate your legal personal representative — the person who will take care of your estate. In that case, your super will be paid out according to your will. However, your nomination will be invalid if you choose someone who doesn’t fit the legal definition of a super death dependant and trustee discretion will apply.

If you choose to pay your super death benefits as an income stream (pension) then other restrictions apply. For example, a death benefit paid as an income stream to a child can only be paid until age 25 when any remaining capital must be paid out as a tax-free lump sum. However, it can continue if the child is disabled.

Why is it important?

For most retirees, super is our biggest asset outside the family home. You should consider who will receive your super regardless of whether it is held in accumulation phase or is being drawn down as a pension.

Which option is right for me?

The best option for you depends on your personal circumstances. Here’s an overview of the choices:

Option 1: Non-binding nomination

A non-binding nomination is a guide for your super trustee when deciding who will get your super benefits. This will work in straightforward family situations for example, leaving a death benefit to your spouse. However, the trustee has the final say, especially if you nominate someone who isn’t legally a dependant.

Option 2: Binding nomination

A binding nomination gives your super trustee no choice but to follow your instructions, unless they are invalid.

Pros

Cons

  • More control over how your super is divided — especially in a complex family situation
  • Could give your beneficiaries a choice about whether to receive a lump sum or a pension
  • Can be updated at any time
  • May be able to nominate whether the beneficiary receives a lump sum or pension
  • Less flexibility if something changes, you fail to update your nomination and it becomes invalid. Generally, trustee discretion applies if the nomination is invalid.

Option 3: Reversionary nomination for an account-based pension

This option is only available once you retire and decide to take your super as an income stream, such as an account-based pension. You nominate a reversionary beneficiary when you start your pension, that is, the person you’d like to continue receiving your pension if you die.

Pros

Cons
  • A simple and stress-free option for retirees who would like their pensions to be paid to a surviving partner or family member
  • You may be able to choose only one beneficiary (depending on your pension provider)
  • Generally it cannot be changed unless a new pension is started
  • If your nomination is invalid at time of death, trustee discretion will usually apply

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How do I take control?

Step 1: Find out where you stand

Check your most recent super statement or contact your adviser to check whether you have a death benefit nomination in force.

Step 2: Decide

If you don’t have one, or if you’d like to change it, then consider the options. A financial adviser can help you if you’re unsure which choice suits you best.