Will Your Superannuation Protect Your Loved Ones?

Mar 7, 2025 | Superannuation

How To Set Up Super Correctly to Protect Loved Ones

Ensuring Your Super Goes Where You Want When You’re Gone

By Deidre Molloy, Director at TSP Accountants & Business Advisors

We all contribute to our superannuation throughout our working lives, but many of us don’t consider what happens to these funds after we’re gone. Although this might be an uncomfortable topic for many, recent government announcements about introducing mandatory standards for large superannuation funds to deliver timely and compassionate handling of death benefits highlight a growing concern in this area.

The Current Landscape

With Australia’s superannuation value now around $4.1 trillion, it’s crucial to understand that your super doesn’t automatically become part of your estate when you pass away. Instead, it’s paid to eligible beneficiaries according to fund rules, superannuation law, and any death benefit nomination you’ve made.

What’s concerning is that complaints to the Australian Financial Complaints Authority (AFCA) about death benefits handling increased sevenfold between 2021 and 2023, with delays in payments being the primary issue. While most super death benefits are paid within three months, others can take well over a year to process.

Taking Control of Your Super’s Destination

As accountants and advisors, we regularly see the complications that arise when proper planning hasn’t been put in place. Without clear instructions, the superannuation fund trustee has discretion over who receives your benefits.

There are four types of death nominations to consider:

  1. Binding death benefit nomination: Legally directs your super to your nominated eligible beneficiary. These typically lapse after 3 years unless they’re non-lapsing.
  2. Non-lapsing binding death benefit nomination: Remains in place until you cancel or replace it, ensuring your super is directed to your chosen beneficiary.
  3. Non-binding death nomination: Serves as a guide for trustees but they retain discretion over the final recipient.
  4. Reversionary beneficiary: For those already receiving a pension from their super, payments can automatically continue to a nominated beneficiary (usually a spouse or child under 18).

Eligible Beneficiaries

Your super can only be paid to dependants (spouse, children, or someone with whom you have an interdependency relationship), your legal representative, or someone financially dependent on you.

If you don’t make a nomination, trustees will decide who receives your superannuation according to state or territory laws – typically a dependant or your estate’s legal representative.

Common Pitfalls

I’ve seen numerous cases where nominations have been successfully contested. For validity, your nomination must be in writing, properly signed, dated, and witnessed. The wording must be clear and legally binding, using legal names for beneficiaries.

One major cause of delay is when there’s no valid nomination and multiple potential claimants, requiring trustees to navigate complex family situations.

What You Should Do Today

Whether you’re just starting your career or approaching retirement, I strongly recommend checking your superannuation death benefit nominations. Ensure you have the right type of nomination in place, and that it’s valid and correctly structured.

This simple step won’t eliminate all potential delays, but it will make the process significantly quicker and less burdensome for your loved ones during an already difficult time.

At TSP Accountants & Business Advisors, we’re here to help you navigate these important decisions. While it may not be the most comfortable topic to discuss, proper planning now can save your family considerable stress and uncertainty in the future. Get in contact if this information raises questions for you. Call on 4926 4155 or email us admin@tspaccountants.com.au

Deidre Molloy | BCom, CA
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