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|