“Let's say I'm still working the classic transition to retirement phase, and I have money in accumulation, and I start a pension, so more money goes into the super fund. With that money that's just been committed, I start another pension.”

With two pensions, and still working, more contributions will go into the fund, and a third pension is started, as an individual cannot add to the capital supporting a pension by way of contribution or rollover.

“I daresay that's a pretty common way [that multiple pension accounts are started]. However, let's say you get to the stage where you want simplicity and administration efficiency and streamlining and would like to convert lots of little pensions into one big pension – that is a very painful process.”

The process, he said, involves first ensuring that each pension has paid at least the pro-rated minimum for that financial year, which is often the first point at which difficulties will arise.

“Many people decide they will do this on 1 July of the financial year before a pro-rated minimum needs to be paid, but the ATO states that if you commute a pension on 1 July that you still have to pay a pro-rated minimum, calculated on one day, even if you committed at one second past midnight.”

“Next, the ATO would want to see a request from the member and the trustee accepting that request to commit the pension, and you would need to value the pension at market value.”

Following this, a TBA report would need to be lodged and all the commuted monies from the pensions merged.

“You would also have to think about the implications of merging all of the tax-free and taxable components, and whether that's strategic, which is a different conversation in itself,” Figot said.

“You have to ask yourself all these questions and then do it all again in reverse to start one pension, which would involve things like a member request, trustee resolutions, potentially a product disclosure statement, EBA report, or again AFSL implications. It's an administration nightmare.”