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Transition to retirement

Estate planning

Section: 15.10

This section is a summary of the estate planning rules that apply to TTR income streams.

What happens when a TTR income stream recipient dies?

Where a TTR income stream recipient dies, the death benefit options are broadly the same as upon the death of an account based pension recipient.

No valid reversionary beneficiary

Where there is no valid reversionary beneficiary nomination in place, the TTR income stream ceases at the time of death. Any new death benefit income stream paid to an eligible beneficiary cannot be a TTR income stream (as the new income stream is commenced wholly with unrestricted non-preserved benefits). Where a new death benefit account based pension is paid on the death of a TTR income stream recipient.

Valid reversionary beneficiary

Where there is a valid reversionary beneficiary in place, the TTR income stream automatically reverts on the date of death to the reversionary beneficiary. Legislation has been passed to ensure that the TTR income stream automatically reverts to the reversionary beneficiary even where the beneficiary has not met a condition of release.

A reversionary nomination will only be valid if the nominated person is, under the SIS Regulations, a dependant of the member (see below) who is able to receive a death benefit as an income stream.

Upon reversion, a TTR income stream technically remains a TTR income stream. However, as a full condition of release (death) has been satisfied, the income stream is not subject to the additional maximum payment and commutation restrictions that initially apply to a TTR income stream.

Transfer balance cap

A TTR income stream that reverts to a reversionary beneficiary is always a retirement phase income stream of the beneficiary, regardless of whether they have reached age 65 or satisfied another eligible condition of release.

Where a TTR income stream automatically reverts to a nominated beneficiary on the death of the original recipient, the balance of the pension as at the time of death will count as a credit to the beneficiary's transfer balance account. However, to give the beneficiary time to arrange their affairs, the credit will be deferred and will not arise in the beneficiary's transfer balance account until 12 months from the date of death.

It should also be noted that this 12 month deferral rule also applies where a TTR income stream reverted to a member's beneficiary between 1 July 2016 and 30 June 2017. For example, where a TTR income stream reverted to a member's beneficiary on 1 October 2016, the beneficiary's transfer balance account was credited on 1 October 2017 with the value of the income stream as at 30 June 2017. Where a TTR income stream reverted to a member's beneficiary more than 12 months prior to 1 July 2017, the balance of the TTR income stream at 30 June 2017 was credited to the beneficiary's transfer balance account on 1 July 2017.

Child death benefit TTR income streams

A TTR income stream can only automatically revert to a child in limited circumstances. A child death benefit TTR income stream is subject to the same modified rules, tax treatment and transfer balance cap assessment as a child death benefit account based pension.

Any new death benefit income stream paid to a child as a result of a TTR income stream recipient's death cannot be a TTR income stream (as the new income stream is commenced wholly with unrestricted non-preserved benefits). Where a new child death benefit account based pension is paid on the death of a TTR income stream recipient.

Last modified: Wednesday, July 24, 2019