3 Responses to The merits of reversionary versus non-reversionary pensions

  1. Ken June 27, 2017 at 12:59 PM #

    Reversionary Pensions: I read the article on reversionary pensions and the transfer balance cap which triggered a concern. At June 30 the balance in my account based pension will be in the transition zone between 1.6M and 1.7M. I understand that I have 6 months to remove the excess. The pension is reversionary to my wife. What happens if I die before I have been able to remove the excess? regards Ken

  2. Monica Rule June 27, 2017 at 1:00 PM #

    Dear Ken,

    If on 1 July 2017, the balance of your retirement account based pension is in excess of $1.6 million transfer balance cap by no more than $100,000, you have until 31 December to remove the excess. Provided the excess is removed within 6 months, the Tax Office will not impose any excess transfer balance tax on the excess amount.

    If your retirement account based pension is “reversionary”, it means, upon your death the balance of your pension account on the date of death will count towards your spouse’s transfer balance cap. However, it will not count until 12 months from the date of your death. This will give your spouse time to remove any excess above her transfer balance cap from the SMSF.

    As the excess transfer balance cap ceases upon a member’s death, I assume the death benefit rules will take affect upon your death if you did not remove the excess within the 6 month time period prior to your death. This means, as long as your spouse removes the excess from her transfer balance cap, she will not have the excess transfer balance tax imposed on her.

    I hope this answers your question.

    Kind regards

    Monica Rule
    http://www.monicarule.com.au

  3. Ken June 27, 2017 at 8:22 PM #

    Thank you for your very prompt reply clarifying my query.

    I had just read Alex Denham’s article “Is it time to review your super pension” in Cufflinks newsletter 206 of 16 June 2017 and realised the example was very similar to my own situation. I did not understand Denham’s comment in the example “that Jenny cannot roll over any of Brian’s pension” and therefore wondered how my wife would be able to remove the excess. But I think that means she still can remove the excess by cashing it in and taking it out of the super system.

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