Planning Ahead: The Role of Reversionary Pensions in Protecting Your Family’s Future

Planning for the future isn’t just about building wealth — it’s also about protecting it and making sure it ends up exactly where you want it when the time comes. That’s where estate planning comes in. It helps you take control, reduce complications for your loved ones, and make sure your assets are dealt with in the way you intended.

One area that’s often overlooked but can play a powerful role in a smart estate planning strategy, is the use of reversionary pension.

So, What Exactly Is a Reversionary Pension?

Put simply, a reversionary pension is a type of income stream set up using a deceased person’s superannuation. It’s only available to certain dependants — like a spouse, a de facto partner, or dependent children.  Instead of receiving a lump sum after someone passes away, the beneficiary continues to receive regular payments from the deceased pension account.

Who Might Benefit from It?

If you’ve lost a loved one who had super, and you were financially dependent on them, a reversionary pension might be an option.   It can be a smart way to manage tax, cash flow, and long-term financial stability. It’s not something that applies to everyone, but when it does, it can make a real difference.

It can help:

• Spouses and partners continue receiving income in a tax effective manner

• Dependent children be financially supported in the longer term in a tax effective manner

It’s important to note, though, that this should be considered and used as part of a broader estate plan as there are limits on the amounts you can have in your super account and this might not work for you. 

Making Sense of the Jargon: Reversionary, Non-Reversionary & BDBNs

There’s a lot of terminology in superannuation that can be confusing — especially when it comes to what happens after someone passes away. Here’s a quick breakdown:

• Reversionary pensions: These automatically pass to a nominated dependent when the person dies. It’s clean, simple, and avoids delays — but the nomination has to be documented as part of your pension paperwork.

• Non-reversionary pensions: The trustee decides how the benefit is paid out. There’s more flexibility here, but also more uncertainty.

• Binding Death Benefit Nominations (BDBNs): These give you control. They legally bind the trustee to follow your wishes — but only if they’re valid, signed properly, and kept up to date.

Getting these settings right can mean the difference between a smooth handover and a drawn-out, expensive process for your family.

Reversionary Pensions as Part of Your Estate Plan – What You Need To Think About

Reversionary pensions aren’t just a financial tool — they’re part of a bigger picture: how your legacy is structured. If you’re thinking about estate planning, here are seven things to think about:

1. Clarify Your Objectives
   What do you want your estate to achieve? Whether it’s helping kids through university, giving loved ones financial security, or protecting assets — clear goals lead to better plans.

2. Review What You’ve Got
   A solid plan starts with understanding your current financial position and identifying how to transfer wealth in the most tax-effective way.

3. Check Your Beneficiaries
   Your super doesn’t automatically go through your will. Extra planning needs to happen — ensures it ends up with the right people.
   
4. Explore Trusts
   Testamentary or family trusts can provide added protection, tax benefits, and control over how and
   when beneficiaries receive assets. It’s worth discussing with an adviser.
   
5. Document Your Plans in a Valid Will
   A legally sound will is non-negotiable. Without one, the law decides where your assets go — and it might not reflect your wishes.
   
6. Appoint Powers of Attorney
   If something happens and you can’t make decisions, who will step in? Choosing someone you trust is essential — both for financial and medical matters.
   
7. Keep It Fresh
   Life changes — and so should your estate plan. Marriage, divorce, children, or major financial changes all mean it’s time for a review.

Not Sure Where to Begin? We’re Here to Help

If all this sounds a bit overwhelming — that’s completely normal. Thinking about what happens after you’re gone isn’t easy. But the good news? You don’t have to figure it all out on your own.

A quick chat with someone who understands the landscape can make things clearer, calmer, and more actionable.

Book a free 15-minute, no-obligation consultation with one of our advisers. Whether you’re starting from scratch or reviewing your current arrangements, we’ll help you take the next step with confidence.

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