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Is there still a need for reversionary pensions?
I’ve been a strong advocate for reversionary pensions for some time, in particular in light of the Commissioner’s initial views expressed within TR 2011/D3, which discussed when a pension commences and ceases.
Back in September 2010, I set out my rationale regarding why I thought structuring pensions with an automatic reversionary was so important. Until now… well, it kind of doesn’t matter anymore, one way or the other, given the recent legislative changes to the:
- Continuation of a fund’s tax exemption post the death of a member; and
- Providing an alternate method for determining the tax-free and taxable status of certain superannuation interests.
With these changes stated above, many of the key drivers for establishing a reversionary pensions have now been diminished.
It’s not to say that non-reversionary pension provides a better outcome, but in my view if an individual doesn’t have a reversionary beneficiary in place at the commencement of the income stream, then it’s now no big deal!
The outcome in commencing a new income stream by a tax dependant beneficiary will ultimately end up in exactly the same position as a reversionary pension recipient.
So, should you still consider having reversionary pensions in place? Yes, I certainly think so… if at the very least that you’ve been able to make a seamless transition of an income stream from a member to their dependant spouse or other tax dependant beneficiary.
Aaron Dunn is managing director at the SMSF Academy.
What about the new deeming on income streams by Centrelink from 1/1/2015 ? A reversionary will continue to benefit from the grandfathering.0- Aaron
I think withdrawing more is a good thing - we often see that we collect more than we want - which means that we usually leave an inheritance of about more than half of what we have accumulated - hence by withdrawing more (and not being able to re-contribute) will force the retirees to spend - on the other side of the coin - if return is 6 or 7% as there is no tax in pension phase - you are only consuing the growth - only the fruit - the tree is still entact... for kids0
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