A reversionary pension is a binding beneficiary arrangement where the nominated individual automatically continues the deceased client's income stream pension without needing a condition of release. This guide outlines the process for setting up a reversionary pension, as well as the restrictions and other conditions.
What is a reversionary pension?
A reversionary pension is a type of direction where the individual automatically continues the pension of the deceased client. Reversionary pensions are only valid for income stream accounts and are nominated at the time of application or through Step 5 on the Change of Details form. This differs from other beneficiaries which the funds can be split between multiple people and arranged to be paid in different ways.
Does the reversionary need to meet a condition of release?
No, a reversionary pension does not need a condition of release met.
What is Netwealth's process when a death notification is received with a reversionary pension nomination?
- Once Netwealth is notified, the relevant documentation (claim paperwork) is sent to the adviser/reversionary/beneficiaries.
- Once the paperwork is returned to Netwealth, the reversionary can begin to be set up.
- The assets of the deceased clients account are transferred in-specie along with any cash over to the reversionary pension.
- Once the funds have been transferred, the income stream will continue based upon the instructions received from the reversionary member. This is treated as a continuation of the income stream any pension payments that were paid before the member passed away will contribute to the minimum requirements. Read below on adjusting this income stream.
What are the restrictions with withdrawals for a reversionary account?
A block benefit payment flag is applied on the account.
If the reversionary wishes to withdraw a lump sum or close the account in cash, Netwealth can process this with the standard forms.
If the reversionary wishes to rollover to an external fund, Netwealth will have to send paperwork to the fund ensuring the separation of the reversionary funds to other funds. They can start this process by providing a Benefit Payment Form.
The web is showing the reversionary income stream does not hit the yearly minimum, how do we fix this?
When a new reversionary income stream commences, the minimum is the same as the deceased clients account. The minimum for the financial year includes payments that were made to the deceased client, so the reversionary member will not receive the complete minimum amount in that first financial year. Due to limitations on the web, the web will only show the amount the reversionary member is receiving for the financial year, not including the payments already made to the deceased member.
What happens if the reversionary beneficiary passes away and then client passes away without updating the account?
In this case, Netwealth would default the account to remove the reversionary and the default would revert to the legal representative of the client. Netwealth will need a death notification for the reversionary beneficiary.