SMSF specialist flags pensions strategy post-reform
For clients with blended families, setting up a second SMSF may be an effective strategy for structuring their pension assets in relation to the transfer balance cap, according to one SMSF specialist.
Cooper Partners director Jemma Sanderson says under the recent super reforms, SMSF trustees with more than $1.6 million cannot use the segregated method and, therefore, can’t designate the particular assets in the fund that will go into their pension account and the assets that will go to accumulation.
“What some people might be looking to do, [however], and I’m seeing this more with clients where there’s a blended family, is set up another fund,” Ms Sanderson said.
“They have one fund where their transfer balance cap amount is and the assets supporting that, and they have another fund that they set up where all of their other assets [go for] the accumulation account.”
Ms Sanderson said having this in place enables them to segregate to some degree because they just have their pension assets in the one fund and all other assets in another fund.
“It also has an added benefit from an estate planning perspective in that if you want some of your super to go to your children from your previous relationship, you can designate that in one of the funds and have the other fund go to the spouse,” she said.
“So there’s the ability to tick off on both of those boxes from that perspective.”
For clients with multiple pension accounts, one consideration with this strategy is the taxation components in each pension account.
“You will probably want the pension accounts that have a 100 per cent tax-free component or the highest proportion of tax-free component to form part of that $1.6 million,” Ms Sanderson said.
“Then the ones with the highest taxable component [should] be pulled back into accumulation phase.”
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 has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.