Superannuation in pension phase

Making sure your superannuation is dealt with in your estate plan is important, because it is often one of our biggest assets. When your superannuation is in pension phase, it needs to be handled slightly differently.

When you are working still, you superannuation is in its accumulation phase. If your died while you’re in accumulation phase, your superannuation being paid out as a lump sum is the primary way of taking your superannuation out.

But then once you’ve retired and you’re over the age to start accessing your super, you convert your accumulation phase into pension phase superannuation. You start drawing on it.

This is the time to think about amending your estate plan and particularly what you want to do with your superannuation.

Once you’re in pension phase, you can leave a reversionary pension to your spouse. So that might become your preference, instead of forcing that superannuation to come out as a lump sum when you pass away.

There are tax benefits for your spouse to keep your superannuation in the form of superannuation, rather than it being paid out as a lump sum. They pay less tax on the income from the superannuation than they would if the lump sum was invested into a term deposit.

While your superannuation is still superannuation, the income is counted in the income test for getting a Centrelink pension. But the superannuation is not counted as an asset. Whereas, if you have the superannuation paid as a lump sum to your spouse, the lump sum is an asset to be declared, and may knock him or her over the asset test and off the Centrelink benefits.

This is why considering your estate plan when your superannuation moves from accumulation to pension phase is important. Do you want it to remain as a pension for your spouse, or are you still happy for it to come out as a lump sum?

For more information, get in touch with our team at admin@tbalaw.com.au or call 1300 043 103.

Superannuation in pension phase