A sector specialist has warned practitioners of the legal traps associated with winding up legacy pensions under the five-year amnesty announced in December last year allowing SMSF trustees to do so.
Accurium head of SMSF education Mark Ellem noted issues can arise for particular practitioners due to the fact legacy pensions are defined as a financial product, in turn restricting the type of services some stakeholders can provide in ending these structures.
“When you’re exiting out of legacy pensions, and out of pensions in general, that is a recommendation to dispose of financial products, so you need to hold the appropriate licence to do so,” Ellem told delegates at the recent SMSF Professionals Day 2025 co-hosted by selfmanagedsuper and Accurium.
To this end, Ellem reminded attendees exactly how this limits the services they can provide to clients on commuting legacy pensions.
“As an accountant or unlicensed adviser, you can tell them about what the law allows and what the consequences of the law are and what the transfer balance account outcome might be,” he confirmed.
“You can do all of those things. You just can’t make a recommendation to exit a legacy pension; only a licensed financial adviser can.
“There might be advice on tax, such as determining what the tax consequences will be now that you’ve unwound a legacy pension and particularly if the client has pulled money out of the fund.
“You need to be a registered tax agent to give that advice and for the defined benefit pensions you may need actuarial services, particularly if the fund has multiple defined benefit pensions and you need to split the reserve.”
According to Ellem, providing advice in relation to the commutation of legacy pensions is not the only issue of which practitioners need to be aware from a compliance perspective.
“There will be documents involved in the exit of these pensions and so again only lawyers can prepare legal documents,” he said.
“[You then need to find out if] you have a document provider who can prepare the relevant documents.”
