BDBN comparable to reversionary pension

An SMSF lawyer has confirmed a binding death benefit nomination (BDBN) can achieve exactly the same outcome as a reversionary pension, despite an ATO statement to the contrary.

“What’s the difference between a binding death benefit nomination and a reversionary pension? A reversionary pension is a paragraph in pension terms which says ‘when I die, my pension continues to my spouse’,” Cooper Grace Ward partner Scott Hay-Bartlem told attendees of last week’s SMSF Association Technical Summit 2026 in Sydney.

“What does a binding death benefit nomination say? It says ‘when I die my superannuation must be paid to a particular person’. But it could also go on to say ‘and it must be paid to them as a continuation of my distinct pension’.

“What does that sound like? It sounds like a reversionary pension, doesn’t it?”

Hay-Bartlem noted this opposed the position the ATO has taken on the matter in the past, but insisted the regulator’s interpretation is incorrect.

“[When the transfer balance cap rules were introduced], the ATO came out and said: ‘if you have a binding death benefit nomination, that’s not a reversionary pension because binding death benefit nominations only ever say who [receives the death benefit] and not how [they receive it] and that leaves trustee discretion,’” he said.

“That’s actually rubbish because there are lots of binding death benefit nominations out there that say who and how and that removes the discretion.”

According to Hay-Bartlem, the use of a BDBN in the place of a reversionary pension can be more advantageous because they are easier to amend should the life circumstances of the trustee in question change.

“Can you revoke a binding death benefit nomination? Yes, it’s quite clear. Can you revoke a reversionary pension? That might be a bit more complicated,” he said.

“So it is in fact easier [to achieve the outcome using] a binding death benefit nomination that goes a bit further than an ordinary one.”