Lawyer pinpoints common flaw in TRIS pension documents
Pension documents for transition to retirement income streams continue to be neglected, with many documents missing important clauses and placing unnecessary restrictions on clients, warns an industry lawyer.
Speaking to SMSF Adviser, Cooper Grace Ward partner Scott Hay-Bartlem said he is seeing situations where an SMSF trustee who commenced a TRIS before they retired is unable to partially commute or take a pension payment of more than 10 per cent even though they’re now 65, because their pension documents don’t allow it.
“A good set of a TRIS pension documents will say that when someone satisfies one of those conditions of release, the TRIS limitations drop off, and it becomes a normal account-based pension. Lots of pension documents don’t actually say that,” said Mr Hay-Bartlem.
“It’s really important for advisers to be aware of what their pension documents say, at least with the TRISs, so that those limitations will drop off at the appropriate time.”
If the pension documents don’t allow for these restrictions to be removed upon the member meeting a condition of release, the pension may have to be stopped and restarted or the pension documents will need to be amended, he explained.
One of the other areas where pension documents are deficient, he said, is with reversionary pensions.
“I saw lots of examples last year where people thought their pensions were reversionary but there was nothing in the pension documents,” he cautioned.
Unsigned pension documents are another significant issue said Mr Hay-Bartlem.
“We’re seeing more and more cases where there’s fighting about the terms in documents. So making sure that pension documents say what we think they say, and making sure that they have the effect that we think they’ll have, is really important, particularly with older pension documents where people weren’t putting as much in them as we would today,” he stressed.
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.