Planning for the Unexpected
With approximately 23.2 million accounts and more than $3.3 trillion in assets in Australia, superannuation is something that most of us are fortunate enough to have. It helps set us up for retirement, but it can also act as financial protection for our loved ones.
Thinking about what happens to our finances when we pass away isn’t something many people enjoy, but in order to keep our loved ones secure it’s critical we plan ahead. This is where nominating a beneficiary comes in.
Superannuation companies and their trustees have different types of beneficiary nominations they offer, in this article we breakdown what a beneficiary is and the different types that exist within super.
What is a Beneficiary?
A beneficiary is generally your spouse, child, an individual who is financially dependent on you at the time of your death, or the executor of your estate. They stand to receive your superannuation along with any life insurance held within your super that may be payable upon your death.
Not having a beneficiary in place at the time of your passing provides your super fund with the discretion to dictate who receives these funds.
Types of beneficiary nominations
1. Binding beneficiary nomination
This type of beneficiary is legally binding, which means your final wishes will be upheld and your super will be distributed to the beneficiary you nominate.
It sounds straightforward, but as with life things can unexpectedly change. You may have more children, marry, or a listed beneficiary may pass away, as such binding nominations automatically lapse every three years. Just before this timeframe your binding beneficiary nomination must be renewed, or you risk them being treated as a non-binding nomination.
2. Non-binding beneficiary nomination
This type of beneficiary is not legally binding, meaning it acts as a guide in helping your superannuation fund decide who should receive your super and any life insurance benefit that may be payable upon your death.
3. Non-lapsing beneficiary nomination
Unlike a binding beneficiary nomination this type of beneficiary does not lapse after a three year period, rather, it continues on – so it’s crucial to keep it up to date.
Your super fund will still have discretion over the distribution of funds if your non-lapsing nomination is invalid, or they were not a dependant at the time of your passing.
4. Reversionary beneficiary nomination
This type of beneficiary nomination is available to those receiving an account based pension, with the beneficiary an eligible dependent who will continue to receive your superannuation pension, or lump sum payment, if you were to pass away.
They are nominated at the time your pension commences and cannot be changed. You can only nominate one reversionary beneficiary, so should you wish to change your beneficiary you must cancel your existing pension and commence a new one.
What happens if I don’t have a beneficiary listed?
If you were to pass away without a beneficiary listed your super fund will follow the relevant laws to decide who receives your funds, but in most cases it will be paid to your dependants or to your estate.
At Shape we believe in planning for the future, and ensuring your superannuation is not only invested appropriately but also reflects your wishes if you were to pass. To find out who your beneficiary is please don’t hesitate to reach out to our team today.