SMSF adviser logo
subscribe to our newsletter

Reversionary pensions predicted to escape $1.6m transfer cap

pension annuity
Miranda Brownlee
23 September 2016 — 1 minute read

SMSF practitioners may want to consider changing death benefit nominations to reversionary pensions for their clients’ estate planning, amid speculation that the $1.6 million pension transfer cap might not apply to reversionary pensions.

Speaking at an SMSF Association breakfast event, Townsends Business and Corporate Lawyers Michael Hallinan said while the government has yet to confirm this, there shouldn’t be any reason to revaluate reversionary pensions under the $1.6 million pension transfer cap as these pensions already met the cap restrictions when they were first established.

“If a husband has already passed the $1.6 million transfer cap test and that pension is subsequently transferred to their spouse, there shouldn’t be any reason to retest that pension a second time under the cap,” Mr Hallinan said.


“The argument for why it shouldn’t be a problem is that you’re not actually transferring money into starting a new pension. It’s a continuation of an existing pension, but the nevertheless, we will have to wait for the legislation to really know.”

Julie Hartley from Townsends Business and Corporate Lawyers also agreed that the government is unlikely to restrict this given that the value of pension account can increase above $1.6 million once the pension has already been commenced.

“It similar to what the government has said about growth, once it’s been transferred it doesn’t matter, even if the value doubles or triples,” Ms Hartley said.

Meanwhile, Verante Financial Planning’s Liam Shorte said it would only apply to reversionary pensions because they are already in the pension phase, adding that if it is legislated, practitioners may want to revaluate their clients’ estate planning.

“It is definitely a good idea to look at anything that’s just a binding nomination instead of a reversionary pension,” he said.


Miranda Brownlee

Miranda Brownlee

Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.

Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.

You can email Miranda on: [email protected]momentummedia.com.au
Reversionary pensions predicted to escape $1.6m transfer cap
pension annuity
smsfadviser logo
join the discussion


Get the latest news and opinions delivered to your inbox each morning

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.