He told SMSF Adviser that if an individual was acting as power of attorney for their mother and their mother’s super fund had a balance of $2 million, the fund would be broken into the $1.6 million pension component and a $400,000 accumulation component.

“Say, mum needs an extra $100,000, do I take it out of the pension money because I’m using up part of the $1.6 million cap and that way I can justify it conceptually because it’s tax free? That would leave the accumulation component intact, the $400,000, and I’m a beneficiary so I want the $400,000 to build up,” Mr Bobbin said.

“Or maybe I do the reverse and I take the money out of the accumulation component because I want to build up the pension money. So I take the money out of the $400,000 component because that’s paying tax and the rest of it isn’t so I keep her pension to the absolute minimum and when she needs extra money, I take it out of the lump sum money.”

Mr Bobbin said if you have got a power of attorney that’s specifically dedicated to a super fund, it can create a potential conflict of interest in terms of how they make a decision because that decision will impact ultimately on what the death benefit may end up being.

“[For example] if mum has a reversionary pension to dad but the lump sum is going to be paid out to the kids, then as a power of attorney holder if I’m dad, or maybe a step-dad, then I may want to actually pay the money out of the accumulation part, not the pension part, because by maximising the pension, I maximise my reversionary pension,” he explained.

“If I’m the child on the other hand, [acting as the power of attorney] then I don’t want this Johnny-come-lately to get the money. So it becomes quite significant where the end benefit in the super fund goes to different people on death [and] the income stream versus whatever the accumulation amount is goes to different people. That’s where it really becomes an issue.”