Super Reforms – Reversionary Pensions

Super Reforms – Reversionary Pensions

John has a reversionary pension worth $1 million at the time of his death on 1 August 2017. The pension reverts to John’s wife, Heather. Heather already has her own pension and a transfer balance account balance of $800,000.

Unless Heather acts within 1 year, the combined value of the two pensions will cause her to breach her transfer balance cap. Heather can fully commute either pension or she can undertake a partial commutation for the amount of the potential excess, $200,000.

On 31 July 2018, Heather makes a partial commutation of her pension and receives a superannuation lump sum of $200,000. On that date, a debit arises in her transfer balance account for that amount bringing her transfer balance account down to $600,000.

The $1 million credit in respect of the reversionary pension arises in Heather’s transfer balance account on 1 August 2018. Heather has not breached her transfer balance cap

Heather’s Pension @ 1/8/2017 $800,000 $800,000 $1,600,000 $1,600,000
When Reversionary Pension is Included $1,800,000 $1,800,000 $1,600,000 $1,600,000
After $200,000 Commutation $1,600,000 $1,600,000 $1,600,000 $1,600,000