Recipients of a death benefit pension looking to combine it with an existing member benefit income stream to avoid managing two pensions should reconsider as the benefits may offset the administrative work involved, a technical expert has noted.
BT Financial Group technical consultant Matt Manning said it was not possible under superannuation law to combine a member pension with a death benefit income stream nor roll the latter into accumulation phase to offset the cost of running them both.
Manning noted it was possible to merge them in other ways if they met certain criteria, but two pensions may be a better tax and estate planning option for some superannuants.
“In those sort of situations we could withdraw the death benefit pension, recontribute it as a non-concessional contribution and then combine it with the member pension,” he said during a webinar today.
“Doing it that way, we would end up with all member money because we have fully cashed the death benefit and would go back to just having one member pension.
“We do have to look at the contribution standards as it not going to work if the member is above 75, has already used their non-concessional cap and if they are above the total super balance eligibility criteria to receive non-concessional contributions.
“An alternative to that situation, with estate planning in mind, is when we recontribute the money from the death benefit pension, we could start a separate member pension.
“Running them separately has the advantage of the second pension, the one that we have started with the recontributed funds, is going to be 100 per cent tax-free.
“You might then take the view that if one of the pensions is 100 per cent tax-free, you would just take the minimum from that and then whatever else is needed from the other member pension that has a higher taxable balance.”
