Income stream reversionary status can change

income stream reversionary status

Members can still change the reversionary status of their income stream to add or remove beneficiaries in the right circumstances, a technical expert says.

SMSF members with existing account-based pensions (ABP) can make changes to the reversionary status of their income stream as long their fund’s trust deed allows for the change, a technical expert has said.

Smarter SMSF chief executive Aaron Dunn noted members with an existing income stream such as an account-based pension that did not have a reversionary beneficiary listed could find they were able to change the terms of their income stream to add or remove a beneficiary.

Taking into consideration the terms by which their income stream was payable, their fund’s governing rules and other possible restrictions imposed by law, Dunn pointed out members could in fact make a change to the reversionary status of their income stream without having to commute and repurchase that income stream.

“[People ask] can we actually make a change to the reversionary status of the income stream? What if an existing ABP had no reversionary beneficiary, can we change the terms of the income stream to add or remove a beneficiary?” he said at the recent Smarter SMSF Virtual Day 2021.

“The short answer is that you can attach a reversionary beneficiary midstream, but it depends upon the terms and conditions that may be allowable within the SMSF trust deed and the way in which those pension documents are structured.”

In order for such a change to be actioned according to the requirements of the fund’s governing rules and the law, it was essential any changes to the reversionary status of a particular income stream be made before the relevant member died, he added.

“You can only make that change prospectively, you cannot make that change after the member has passed away,” he said.

He also noted transition-to-retirement income streams were set to make a comeback for retirees despite having fallen out of favour since ceasing to be eligible for tax exemptions in 2017.

In December, Townsends Business and Corporate Lawyers superannuation online services division managing solicitor Jeff Song said SMSF members with reversionary pensions should note their pension may fail to revert if their nominated reversionary pensioner is deemed ineligible to receive income stream death benefits.

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