If you don’t specify who you want to receive your super when you pass away, your super fund gets full control in deciding who does. This means that it may be a good idea for you to nominate the individual you want to get your super; but this nomination can be binding or non-binding and it’s important to know the difference.
Who gets my super if I pass away?
As mentioned, while your will dictates who gets what when it comes to your belongings and assets, your super isn’t actually counted as one of your assets due to it being money held in a company/trust. Your will can only direct the giving away of assets that you owned in your sole name, and knowing this is important in order to ensure that your super balance goes to the individual that you want it to.
The main way you can do this is by making either a binding or non-binding nomination of beneficiary to your super fund, so that they can register who you have explicitly requested for your super to go to.
Who can superannuation death benefits be paid to?
A superannuation death benefit can’t be left (or paid) to just anyone. Under current superannuation legislation, there are reasonably strict guidelines about who is entitled to receive – and who the Trustee can pay – a death benefit to.
Essentially, death benefits must be paid to people who were a ‘dependent’ of the deceased member, and/or the deceased’s legal personal representative. Under the legislation, the term ‘dependent’ can refer to:
- The spouse/defacto partner of the member.
- Any child of the member, whether biological, step or adopted.
- Any person who the Trustee considers to have been wholly or partially dependent on the member at the time of the member’s death; and
- Any person who the Trustee considers to have been in an ‘interdependency relationship’ with the member at the time of the member’s death.
Note that even if you’ve made a binding nomination regarding who you want to receive your super, the Trustee is not obligated to act on your nomination if you haven’t chosen a dependent or your legal personal representative. It’s tricky stuff, and between 2016 and 2017 the Superannuation Complaints Tribunal received 366 complaints about death benefit distribution.
The following table contains details of the superannuation funds rated by Canstar. This table has been sorted by three-year performance (highest to lowest).
Please note that the performance information shown in the table is for the investment option used by Canstar in rating of the superannuation product.
Performance is based on the investment option considered in the 2016 Superannuation Star Ratings, which is the option with 60-80% in growth assets; where multiple options satisfy this criteria, the option with 60-80% in growth assets with the greatest funds under management is selected.
What are the different kinds of beneficiary nominations?
If you want to make a nomination, first you’ll need to decided between binding and non-binding – and if you go with a binding nomination, you may need to then decide whether you want it to be lapsing or non-lapsing.
Binding death nominations
A binding death nomination is a written notice provided to the trustee of your super fund which explicitly nominates a beneficiary for your super benefit in the case of your death. As mentioned, you can choose to nominate either a dependent or a legal personal representative, and a dependent can be a spouse, child, or any other person(s) who could be seen as financially dependent on you at the time of your death.
If you nominate your legal personal representative, then your super benefit will become part of your assets distributed as dictated by your will; in the case of you not having a will, your super benefit will be distributed according to the laws that concern people who die without a will (intestate).
While a binding death nomination can be a helpful way to make sure that your super benefit goes to your intended beneficiary, it’s important to note that not all people with superannuation can make a binding death nomination. Not all super funds offer the option, and a super fund member can only make a nomination if the governing rules of their fund expressly permit them to do so.
Lapsing vs non-lapsing binding death nominations
Some funds also offer the choice between a lapsing and non-lapsing binding nomination: the former must be renewed/reviewed after a certain period (many funds go with three years), whereas the latter is permanent unless you change or review it. However some funds don’t offer this choice, so be sure to check with your specific fund.
Non-binding death nominations
A non-binding death nomination is essentially you indicating who you’d like to receive your super, but not taking any action to ensure that the individual you nominate definitely gets your super benefit. It’s more a guideline you provide to your fund that they take into consideration when deciding who to pay your benefit to, but are not obligated to follow if they think there’s someone who’d be a more appropriate recipient.
Before you can nominate someone to receive your super when you die, you’ve got to find the best-value fund for you first! You can compare funds and find the best one for you with Canstar.