[Updated 27 August 2026 based on 2026-2027FY rates and caps]

When you start an account-based pension, one important decision is what should happen to the remaining balance when you die.

Two common options are:

• nominating an eligible beneficiary to automatically continue receiving the pension
• making a binding death benefit nomination directing the remaining benefit to one or more eligible beneficiaries or your estate.

Both options can provide greater certainty, but they work differently and can have different tax, transfer balance cap, Centrelink and estate planning consequences.

The options available will also depend on the rules of your super fund.

Important note: Super does not automatically form part of your estate

Unlike many other assets, your super does not automatically pass according to your will. Your super fund will generally pay your death benefit to:

• one or more of your dependants (under superannuation law)
• your legal personal representative (usually the executor or administrator of your estate)

Dependants under superannuation law can include your spouse, children of any age, someone financially dependent on you or someone with whom you have an interdependency relationship. Important to note that not every dependant is eligible to receive a death benefit as an income stream. For example, an independent adult child will generally need to receive their benefit as a lump sum.

Also, a dependant for superannuation law purposes is different from being considered a dependant for tax purposes. What this means is that someone may be eligible to receive your super directly but still pay tax on part of the benefit (the taxable component).

What is a reversionary pension nomination?

A reversionary pension nomination is generally made when an account-based pension is established.

It directs the pension to automatically continue to an eligible beneficiary, most commonly a spouse, following the original pensioner’s death.

Provided the nomination is valid, the beneficiary remains eligible and the fund rules allow it, the pension does not cease on death. Instead, the beneficiary becomes entitled to receive the continuing pension.

Potential benefits of a reversionary pension

A reversionary pension can offer several practical benefits.

• Greater certainty: The pension terms generally require the trustee to continue the pension to the nominated beneficiary, provided they remain eligible at the time of death.
• Continuity of income: Pension payments can continue without the beneficiary first having to decide whether to establish a new death benefit pension.
• Fewer decisions during the claims process: There is generally no trustee discretion about who should receive the pension or whether it should initially continue as an income stream.
• Minimum pension continuity: The existing annual minimum pension requirement generally continues for the financial year in which the original pensioner dies. It is not recalculated on a pro-rata basis at the date of death.
• Additional transfer balance cap planning time: The transfer balance credit associated with a reversionary pension generally does not arise until 12 months after the beneficiary becomes entitled to it. This can give the beneficiary time to review their existing retirement-phase pensions and take any necessary action.

Things to consider with a reversionary pension

There are also some important limitations and things to ensure you have considered with reversionary pension nominations.

• It usually needs to be selected at commencement: Many funds only allow a reversionary beneficiary to be nominated when the pension starts. Changing the nomination later may require the pension to be stopped and restarted.
• Usually only one beneficiary can be nominated: A reversionary pension may not be suitable where the member wants to divide their death benefit between several people.
• The beneficiary must remain eligible: The nominated person must generally be an eligible dependant at the time of death. A change in relationship or dependency may affect the nomination.
• The beneficiary’s transfer balance cap still applies: The value of the inherited pension will count towards the beneficiary’s transfer balance cap. If they already have retirement-phase pensions, they may need to commute some of their own pension back to accumulation phase or withdraw money from super.
• Need to be conscious of circumstances changing: If you separate from your nominated reversionary beneficiary, or they predecease you, the nomination fails and the trustee falls back on discretion or on any other valid nomination you have in place.
• It only covers the pension account: More on this below, because it’s the point most often missed.

Binding Death Benefit Nominations

A binding death benefit nomination directs the trustee to pay your super death benefit to your nominated SIS dependants, usually in specified proportions. It can also direct the benefit to your Legal Personal Representative (LPR), so it flows through your estate and is distributed under your Will.

Depending on your fund’s rules, a binding nomination can leave open whether the benefit is taken as a lump sum or, where the beneficiary is eligible, as an income stream.

Potential benefits of a binding nomination

• Multiple beneficiaries: If you want your benefit split between several people, a binding nomination handles it in a way a reversionary nomination can’t.
• A wider range of recipients: A binding nomination can direct the benefit to your LPR or to adult children. Neither of these beneficiaries can receive a reversionary pension.
• Flexibility for your beneficiaries: Where your fund allows it, an eligible beneficiary can decide whether to take a lump sum or start an income stream based on their circumstances at the time.
• It can generally be updated: You can usually change a binding nomination at any point without touching your pension.
• It covers your whole super interest: Including any accumulation balance and insurance proceeds, not just your pension account.

Things to consider with a binding death benefit nomination

• Most nominations lapse: Standard binding nominations expire after three years unless renewed. Some funds and most SMSF deeds allow non-lapsing nominations, but you need to confirm which type you hold and diarise the renewal if it lapses.
• Validity often isn’t tested until you die: A nomination may be accepted by the trustee when made but only scrutinised when the benefit becomes payable. This risk is higher in an SMSF, where the deed may impose specific requirements for a valid nomination. Execution formalities matter — typically signed and dated in the presence of two witnesses aged 18 or over who aren’t named as beneficiaries.
• The benefit has to be dealt with: Where there’s no reversionary nomination, the trustee must cash the death benefit as soon as practicable. The ATO generally reads that as around six months. It can’t sit in the fund indefinitely while your family works out what to do.
• Life events can invalidate it: Marriage, divorce and separation affect nominations differently depending on the fund. Reviewing your nomination after any significant life change isn’t optional and should be part of your broader estate planning review when your circumstances change.
• The nomination must be completed correctly: Witnessing requirements, beneficiary eligibility and nominated percentages must all comply with the applicable rules. Percentages will generally need to total 100%.
• Validity may not be fully tested until death: A nomination may be accepted when it is submitted but later found not to bind the trustee because it has expired, was completed incorrectly or names someone who is no longer eligible.
• Administration may take longer: Where the existing pension is not automatically reversionary, the fund may need to complete its claims and verification process before paying the benefit or starting a new death benefit pension.

Which option is better for you?

It really depends.

When assessing which type of nomination is appropriate, you should consider your specific circumstances, estate planning objectives, need for flexibility and other factors such as grandfathering of an account based pension for social security purposes.

Also, it’s not always either/or, and I think the “versus” framing is a bit misleading, as you may have different nominations for your different superannuation interests/accounts.

In making a decision the most important thing is to make sure you have thought through the implications and how this fits in with your broader estate planning strategy.

Other things to consider

Don’t forget your accumulation account

This is the one we see missed most often.
A reversionary nomination only attaches to the pension it’s made on. If you’re only moving part of your super into an account based pension — because of the transfer balance cap, or because you’re still working, or simply by choice — the balance left in accumulation isn’t covered. Neither is any insurance held in super, which is credited to your accumulation account when a claim is paid.
It’s entirely possible to have a carefully constructed reversionary pension and a six-figure accumulation account with no valid nomination on it at all. Make sure every account is covered.

What do I want to happen if I die at the same time as my spouse?

Couples ask this often, and the honest answer is that it depends on your fund’s rules and where you live.

Where the order of death can’t be determined, state survivorship laws generally deem the elder to have died first and the younger to have survived. In Victoria that’s section 184 of the Property Law Act 1958, and this applied to a reversionary pension can mean the pension reverts to your spouse and then forms part of their estate, distributed under their Will (which may not be what either of you intended, particularly in a blended family). In contrast, a binding nomination to your LPR keeps the benefit within your own estate and your own Will. That isn’t automatically better, but it is a different outcome.

Neither a reversionary pension nor a binding nomination will automatically resolve every simultaneous-death or succession scenario. Complex arrangements, particularly those involving blended families, may require specialist estate planning advice.

The tax question that can get overlooked

Super law and tax law use different definitions of “dependant”, and the gap between them is where most of the unexpected tax sits.

This is particularly important when nominating adult children.

An independent adult child can generally receive a super death benefit as a lump sum, but may pay tax on the taxable component. By comparison, a death benefit paid as a lump sum to a dependant for tax purposes is generally tax-free.

The tax treatment of a death benefit income stream can also depend on:

• the age of the deceased
• the age of the beneficiary
• whether the benefit contains taxed or untaxed elements
• whether the benefit is paid as a lump sum or income stream.

The tax consequences should therefore be considered separately from the question of who is legally eligible to receive the benefit.

Two things worth sorting out before the pension starts

Your tax components lock in. When you commence an account based pension, the proportion of tax-free to taxable component is fixed at that point and applies to every payment and every eventual death benefit from that pension. If a withdrawal and recontribution strategy is something you’d consider to improve that proportion, it needs to happen before the pension commences, not after.

Your transfer balance cap. Commencing a pension uses your personal transfer balance cap. The general cap is $2.1 million for 2026–27, but your personal cap depends on your own history and can be checked through ATO online services via myGov.

It’s also worth understanding what happens to your beneficiary’s cap: a death benefit pension counts towards their cap too. Where it doesn’t fit, they’ll need to commute their own pension back to accumulation or take a lump sum out of super. Death benefit money can’t simply be rolled back into accumulation phase.

A short checklist

Before you commence a pension and make a decision, it’s worth being able to answer these:

• Who are my eligible beneficiaries under super law, and are they tax dependants?
• Does my fund allow a reversionary nomination, and can it be changed later without restarting the pension?
• Is my binding nomination lapsing or non-lapsing, and when does it need renewing?
• Does every super account I hold (pension and accumulation accounts) have a valid nomination?
• Does my fund’s deed say which document wins if my reversionary nomination and binding nomination conflict?
• Do my super nominations and my Will actually point in the same direction?
• Have I reviewed all of this since my last significant life event?

How can we help?

If you have any questions regarding reversionary pensions or binding death benefit nominations, feel free to schedule a chat with one of our experienced financial planners.

General advice warning
This article contains general information and general advice only. It has been prepared without taking into account your objectives, financial situation or needs. Before acting on any of this information, you should consider its appropriateness having regard to your own circumstances and, where relevant, obtain and consider the Product Disclosure Statement for any financial product before deciding to acquire it. Taxation and superannuation rules are complex and subject to change. You should seek advice from a qualified financial adviser, and where appropriate a solicitor or registered tax agent, before making any decision. Figures quoted are current for the 2026–27 financial year. Wealth Collective Pty Ltd trading as Pekada (ABN 95 624 612 684), Corporate Authorised Representative No. 1263725 of Communitas Wealth Pty Ltd, AFSL 500551.