SMSF trustees are making choices around death benefit payments that ensure beneficiaries are receiving their monies in a more timely manner.
Initial death benefit pension payments from SMSFs are generally occurring quicker than Australian Prudential Regulation Authority (APRA)-regulated funds, according to the “Class 2025 Annual Benchmark Report”.
Around 30 per cent of the approximately 2000 deceased members being serviced by Class in the 2024 financial year had a reversionary pension which effectively began immediately for their beneficiaries after their death.
In contrast, a recent analysis by the Australian Securities and Investments Commission of 10 APRA-regulated funds, representing 38 per cent of total member benefits in public offer funds, found the fastest trustee only closed 48 per cent of their death benefit claims in 90 days, whereas the slowest trustee closed only around 8 per cent of claims in the same period.
“Self-managed super fund members are typically more actively involved in making choices around those types of things. You’re going to have an increased percentage of SMSF members who’ve chosen to establish a pension,” Class chief executive Tim Steele said.
Approximately 15 per cent of deceased members had a death benefit pension and more than two in five of those death benefit pension payments on Class (45.1 per cent) began within 30 days of death in the 2024 financial year. The median wait time for the first payment of a death benefit pension dropped from 70 days in the previous year to 54 days in the last year.
The decision to make a pension reversionary upon death in the majority of cases is made when a pension is started, and the decision to take a benefit as a lump sum or a death benefit pension can be made when the member dies.
“Ninety three percent of those over 65 in an SMSF, based on our data, have established a pension, compared to 49 per cent in APRA-regulated funds. So that link between establishing a pension and then a reversionary pension kicking in on death, it makes sense it’s much faster and there’s a high percentage of reversionary pensions in place for a SMSFs,” Steele explained.
Lump sum payments on Class typically took longer to process, with the median wait time for a first death benefit lump sum of 162 days in 2024, which was down on 196 days in 2022 and 182 days in 2023.
It also took some time for death benefits to be paid out in full, with the average time for full benefits to be paid out in 2022 of 279 days and a median time of 196 days.
“It’s a complicated issue ultimately paying out the death benefit and confirms, again, the control that SMSF members have on some of the choices they might make around timing…it may be very deliberate choices as to why they’re choosing to take time and take longer,” Steele acknowledged.
