Understanding Superannuation Beneficiary Nominations

Superannuation is one of the most significant financial assets you will accumulate over your lifetime. Yet, many overlook the critical aspect of nominating your preferred beneficiary to receive your superannuation in the event of your death. Unlike many other assets, superannuation does not automatically form part of your estate, meaning you can control its distribution.

This makes beneficiary nominations essential for ensuring your wishes are honoured and your preferred beneficiaries receive your superannuation benefit in a timely and seamless manner. 

Why Nominations Matter

Without a valid nomination, the trustee of your super fund has discretion over who receives your death benefit. This can lead to:

• Delays in payment

• Legal disputes

• Emotional stress for family members

• Potential tax disadvantages

 To avoid these issues, it is important you understand the types of beneficiary nominations available and choose the most appropriate option to meet your needs.

Types of Superannuation Beneficiary Nominations

No Nomination

Unfortunately, this is a situation we see all too often. In the event you haven't made a beneficiary nomination on your superannuation fund, it's up to the trustee to decide where the money will go. The trustee must act in accordance with their trust deed, and the deed for each superannuation fund can be different.

Your superannuation fund may pay your superannuation benefits to your estate, however this is often a slow process, even where you have a Will in place.

Non-Binding Nomination

A non-binding nomination expresses your preference, but leaves the final decision to your trustee. This nomination type can often be completed on your superannuation fund's online portal, or via a paper form.

Whilst this type of nomination is easy to implement and does provide some direction to your superannuation trustee, there is no certainty in the event of your death, particularly if there is a claim made.

Binding Death Benefit Nomination

A Binding Death Benefit Nomination (BDBN) allows you to nominate you preferred beneficiary or beneficiaries and the trustee is obligated to make payment in-line with your nomination.

This type of nomination must typically be physically signed by the superannuation account holder and witnessed by two adults who are not nominated beneficiaries. Many superannuation funds have BDBN's that expire after three years and in the event it expires, will often revert to a non-binding nomination.

Non-Lapsing Binding Nomination

Some superannuation funds offer a non-lapsing binding nomination which remains valid indefinitely unless revoked or updated. This beneficiary nomination type provides long-term certainty without the administrative burden of needing to renew every three years.

Reversionary Nominations

A reversionary nomination is an additional nomination option for investors in the pension phase. For this nomination to be valid, the reversionary nominee must be a spouse or child under the age of 18.

Unlike other beneficiary nominations which typically payout a lump-sum, this beneficiary nomination allows you to direct your ongoing income payment to an eligible beneficiary.

Keep an eye out for our next article where we discuss who can be nominated as a beneficiary and the taxation treatment of your beneficiary nomination.

If you have any queries about the type of nomination that best suits your needs, please don't hesitate to reach out to us to discuss your options.