An SMSF strategist has identified three elements that should ultimately dictate the level of intricacy incorporated into a reversionary pension.
I Love SMSF founder Grant Abbott said the level of detail associated with a reversionary pension comes down to safety, certainty and security during his latest strategy webinar.
“On a scale of one to 10 you should ask your client how safe do they want the reversionary pension to be. Do they want it like a two out of 10 or a five out of 10?” Abbott asked.
He cited bloodline rules, that is allowing death benefits to be distributed to individuals who are blood relatives only, as a good example of a specific safety measure that would dictate the sophistication contained in the reversionary rules for a pension.
“I ask people do you want the pension upon death to be kept to bloodline only. Is this important to you and being locked out of non-bloodline,” Abbott said.
“[I ask them] on a scale of one to 10 how important it is,” he added.
According to Abbott advisers also need to emphasise the benefits of facilitating an uncomplicated passing on of an existing pension in the event of death.
“If we do it correctly and do a binding resolution then it’s going to be future proof. [The client has decide] do they want that or would they rather see, potentially, their SMSF estate tied up and be subject to [significant] legal fees,” he explained.
Determining this level of detail will lead to other rewards for advises as well, Abbott said.
“If you start doing that then you start to build a really good rapport with the client,” he concluded.