Losing someone you love is hard enough. The last thing your family needs is the added stress of delays and complications when trying to access your superannuation. Unfortunately, this is a reality for many Australians. That’s why the Australian Government is moving to introduce mandatory standards for large super funds to ensure death benefits are paid out more efficiently and with greater care.
Superannuation is a big deal in Australia, with the total value sitting around $4.1 trillion. But many people don’t realise that their super doesn’t automatically become part of their estate when they pass away. Instead, the fund trustee decides who receives it, guided by fund rules, superannuation laws, and any death benefit nomination you’ve made.
But things don’t always run smoothly. Complaints to the Australian Financial Complaints Authority (AFCA) about delays in paying death benefits jumped sevenfold between 2021 and 2023. While most payments are made within three months, some drag on for more than a year. Current super laws are vague, stating that payments must be made “as soon as practicable” after a member’s death.
How to Ensure Your Super Goes Where You Want It To
Sorting out your super nominations can save your loved ones a lot of stress later on. The fund trustee has the final say on who gets your super if you haven’t made a valid nomination. That could mean your benefits end up somewhere you didn’t intend.
There are four main types of death benefit nominations to consider:
- Binding Death Benefit Nomination
A Binding Death Benefit Nomination legally directs your super to your chosen eligible beneficiary. The trustee must pay your super to that person as soon as practicable after your death. Remember, binding nominations generally expire after three years unless you opt for a non-lapsing version.
- Non-Lapsing Binding Death Benefit Nomination
If your fund allows it, this type of nomination remains in place indefinitely until you cancel or replace it. Upon your death, the trustee is legally required to pay your super to the person you’ve nominated.
- Non-Binding Death Nomination
A Non-Binding Death Nomination is more of a guide for the trustee. They will consider your wishes but ultimately have the discretion to pay your super to a different beneficiary or your estate.
- Reversionary Beneficiary
You can nominate a reversionary beneficiary if you’re receiving a super pension (income stream) when you die. Your pension payments will automatically continue to that person. However, this option is generally limited to a spouse or a child under 18.
Who Can Receive Your Super?
Your super can go to a dependant, your legal representative (such as the executor of your Will), or someone with whom you had an interdependency relationship. Under superannuation law, a dependant is your spouse, your child, or someone who relied on you financially or for care.
What If You Don’t Make a Nomination?
If you haven’t made a nomination, or it’s expired or invalid, the fund trustee will decide who gets your super. They’ll distribute it to a dependant or your estate legal representative to be handled according to your Will. This can lead to complications and delays.
Common Pitfalls to Watch Out For
There have been several court cases over the years challenging death nominations. For a nomination to be valid, it must be in writing, signed, dated, and witnessed. It also needs to be clear and legally correct. Always use full legal names and proper terminology, especially if you want your super directed to your estate.
One of the main reasons funds delay payments is when there’s no valid nomination, multiple potential claimants, or a complex family situation that requires careful consideration.
The Bottom Line
No matter your age, it pays to check your super nominations. Ensure you’ve chosen the right type of nomination for your situation, and confirm it’s valid and current. Taking these steps can make a world of difference for your loved ones when the time comes.
Need help to understand your super options or to update your nominations? Get in touch with our team today – we’re here to guide you through the process.