How is a non reversionary pension dealt with on death?

When a pensioner dies, the situation is clear if the pension was reversionary – the pension just continues on seamlessly to the reversionary beneficiary (usually the surviving spouse). But what if the pension was non reversionary?

In fact the balance can be paid out in many ways – including a pension. Of course the usual rules apply and only some people can inherit super as a pension (usually only the surviving spouse). But as long as the recipient is eligible to receive a pension from the deceased’s super, it can happen even if the pension wasn’t reversionary.

The big difference is that the income stream to the surviving spouse in this case would be a brand new pension. It would start when the trustee made the decision to do it. Payments from the “old” pension would stop as soon as the original pensioner died, and payments would only start again once the “new” pension had started.

That might happen very quickly. For example, if the pension was non reversionary but the member had a binding death benefit nomination in place that said the trustee was obliged to pay the balance as a pension, it could happen virtually straight away. In that sense it might look and feel very much like a reversionary pension. In fact if the binding death benefit nomination goes one step further and says that the old pension should continue, it effectively creates a reversionary pension.

On the other hand it might take months – as the trustee gets advice about how to deal with the benefit and make a decision to pay it to the spouse as a pension.

But either way, it is entirely possible to create a new pension (for the surviving spouse) out of a non reversionary pension balance once the original pensioner has died.