Accurate and specific documentation is required to make sure a reversionary pension is enforced in the correct manner, an SMSF specialist lawyer has said.
Speaking at the 2016 SMSF Association State Technical Conference in Sydney last week, Cooper Grace Ward partner Scott Hay-Bartlem said the only way to establish whether a pension was reversionary was to reference the pension terms.
Furthermore, Hay-Bartlem pointed out the pension documents had to have good reversion provisions.
“A pension document is a contract. It’s an agreement between the members and the trustee. If I’m going to enforce a reversionary pension … [and the pension is challenged], I’m going to be taking my pension documents to court,” he said.
“[So], A, I’ve got to find them [and] B, I want a term in my pension documents that say if I die then my pension continues automatically to my spouse. I want to see that in there.
“I’ve seen pension documents where there has been a tick-in-a-box application form saying reversionary and that’s it.
“I don’t think that’s a reversionary pension.”
He said there needed to be more specificity for the pension documents to be truly effective.
“I want pension terms. I want minimums and maximums. I want how often we’re paying it. I want what happens on death if there is going to be a reversion,” he said.
“So make sure you have good reversionary pension documents. It’s really important or the lawyers are going to have a field day [in the event of a challenge].”
