What happens to my superannuation when I die?

People often think that superannuation and associated insurance are distributed according to your Will, yet this is not the case.

Instead, the Trustee decides who receives your superannuation and insurance benefits. This decision is based on your nominated beneficiaries and the type of nomination you made; either a binding death benefit (lapsing and non-lapsing), a non-binding beneficiary (not binding on the Trustee) or reversionary (available for some pension products).

If you have insurance to pay off your debts or provide your family with an inheritance, the type of beneficiary nomination is important to ensure your insurance benefit is distributed according to your wishes.

There are rules on who can receive your superannuation

A beneficiary needs to be a dependant or your legal representative. A dependent could be your spouse, child, someone in an interdependency relationship or someone who is financially dependent on you.

Different tax rates apply depending on:

  • the type of tax components (if you’re unsure on what you have, contact UniSuper Advice)
  • the type of death benefit (lump sum or income stream)
  • the age of the beneficiary and deceased
  • whether the beneficiary is a dependent under tax law. A child (including birth, step, ex-nuptial and adopted) who is over the age of 18 and not financially dependent or living with a permanent disability, isn’t considered a dependent under tax law. They may pay some tax on the death benefit.

In most cases, the lump sum benefit is paid tax-free to dependent beneficiaries. One key exception is the independent adult child, as explained above.

In summary, you should think carefully when completing your superannuation nomination

You can have a binding or non-binding nomination, but you need to consider the appropriate beneficiary, type of payment that will be made (reversionary or lump sum), the tax implications and any insurance outcomes.

UniSuper Advisers are not legal specialists, but we can help you understand your estate considerations. We can also refer you to specialists to help you finalise your plan.

If you’re a spouse of a deceased member, we can guide you through the decisions that need to be made as well as any administration requirements.

The information contained in these responses are not legal, taxation or accounting advice. It is intended to provide general information only. It has been prepared without taking into account your objectives, financial situation or personal needs. Prior to making any investment decisions, you should speak with a financial adviser to consider whether this information is appropriate for your needs, objectives and circumstances. You should also obtain a copy of the relevant product disclosure statement (PDS) prior to making a decision regarding any investment in any financial product. Whilst care has been taken in the preparation of this information, the accuracy or completeness of the information is not guaranteed. This response was prepared and issued by UniSuper Management Pty Ltd ABN 91 006 961 799, AFSL No: 235907, which is also the administrator of, and wholly owned by, the UniSuper Superannuation fund (ABN 91 385 943 850). UniSuper Limited (ABN 54 006 027 121, AFSL 492806) is the trustee of the fund. UniSuper Advice is operated by UniSuper Management Pty Ltd, which is licensed to provide financial product advice to members.