Reversionary Pension

A reversionary pension is an income stream from super that is set up so that, on your death, the pension automatically reverts to (continues being paid to) a nominated death benefit dependant — usually a spouse. Because the pension simply carries on, the surviving dependant keeps a steady income without the fund needing to assess a death benefit claim. It can also offer favourable timing for the transfer balance cap and tax outcomes compared with a lump sum.

Reversionary pensions are popular for couples who want seamless income continuity and are often used alongside an SMSF strategy. Example: Helen's account-based pension was set as reversionary to her husband, so when she died his payments simply continued uninterrupted. Note that a valid reversionary nomination generally overrides a conflicting BDBN, so the two must be coordinated carefully.