An SMSF document provider has entered into the debate about the precedence of reversionary pensions over binding death benefit nominations (BDBN), claiming the former should be considered first where the pension is valid.
Topdocs training and advice national manager Michael Harkin said the view of his organisation was that a valid pension reversion will take precedence over a BDBN.
“The ATO has indicated a BDBN, by itself, does not make a superannuation income stream reversionary,” Harkin said as part of a recent webinar.
“What that means is that if there is a BDBN in favour of an individual and that individual could receive the benefit in the form of a pension, that is still not a reversionary pension.”
He said Topdocs’ position was based on advice received from a superannuation lawyer who was part of its expert panel, and was reflected in its trust deed, which contains a direction that a valid pension reversion will take precedence over a BDBN.
“This effectively means if there is money in a pension account and the reversionary nomination is valid and the nominated recipient is able to receive that money, then the reversion will take place and anything remaining, such as what is in an accumulation or a pension without a reversion, will be dealt with by the BDBN,” he said.
He said Topdocs has seen a large number of deeds that do not properly cover how a pension reversion should be prepared and what a trustee must do, adding: “In many cases, the trust deed should direct how the process will apply and in our deed it clearly states the pension reversion takes precedence.”
