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Binding death benefit nomination and reversionary pensions

It can often be quite confusing working out what will happen to your super when you die since the terminology surrounding superannuation and death can appear quite technical.

A binding death benefit nomination (BDBN) is an instruction by a fund member regarding who can receive the fund member’s super benefits when they die. Having a BDBN in place can provide peace of mind to a fund member as the fund must follow these instructions upon their death.

Those who are nominated by the fund member receive a death benefit, which is a payment from the superannuation fund. It can take the form of a lump sum payment or in the form of a pension.

For a BDBN to be binding, members must nominate their benefit to be paid to one or more dependants. A dependant can be a spouse, a child of the spouse or anyone who has an interdependent relationship with the member.

A reversionary pension is a pre-existing pension that is payable to a dependant (reversionary beneficiary) upon the death of the primary pension fund member. A reversionary pension is not a new pension; it is a redirection of the existing pension to the reversionary pensioner.

Reversionary pensions are typically paid to surviving spouses.

Reversionary pensions work in a similar way to a BDBN. This means that creating a separate BDBN is only necessary when a reversionary pension direction is not in place and a fund member wants more control over what happens to their super benefits after death.

Posted on 20 January '16 by , under Super.

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Superfund categories and what they mean

There are four different categories of super funds. These have different primary features and are more applicable to certain people than they are to others.

Retail super funds

Anyone can join retail funds. They are mostly run by banks and investment companies:

  • Allow for a wide range of investment options.
  • Financial advisors may recommend this type of fund as they receive commissions or might get paid fees for them.
  • Although they usually range from medium to high cost, there may be low-cost alternatives.
  • The companies that own these funds will aim to keep some of the profit they yield

Industry super funds

Anyone can join bigger industry funds, but smaller ones may only be open to people in certain industries i.e. health.

  • Most are accumulation funds but some older ones may have defined benefit members
  • Range from low to medium cost
  • Not-for-profit, so all profits are put back into the fund

Public sector super funds

Only available for government employees

  • Employers contribute more than the 9.5% minimum
  • Modest range of investment choices
  • Newer members are usually in an accumulation fund, but many of the long-term members have defined benefits
  • Low fees
  • Profits are put back into the fund

Corporate super funds

Arranged by employers for employees. Large companies may operate corporate funds under the board of trustees. Some corporate funds are operated by retail or industry funds, but availability is restricted to employees

  • If managed by bigger fund, wide range of investment options
  • Older funds have defined benefits, but most are accumulation funds
  • Low to medium costs for large employers, could be high cost for small employers

Self-managed super funds

Private super fund you manage yourself. Many more nuances to this type of fund. Most prominent feature is the autonomy over investment.

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