Binding death benefit nomination and reversionary pensions

It can often be quite confusing working out what will happen to your super when you die since the terminology surrounding superannuation and death can appear quite technical.

A binding death benefit nomination (BDBN) is an instruction by a fund member regarding who can receive the fund member’s super benefits when they die. Having a BDBN in place can provide peace of mind to a fund member as the fund must follow these instructions upon their death.

Those who are nominated by the fund member receive a death benefit, which is a payment from the superannuation fund. It can take the form of a lump sum payment or in the form of a pension.

For a BDBN to be binding, members must nominate their benefit to be paid to one or more dependants. A dependant can be a spouse, a child of the spouse or anyone who has an interdependent relationship with the member.

A reversionary pension is a pre-existing pension that is payable to a dependant (reversionary beneficiary) upon the death of the primary pension fund member. A reversionary pension is not a new pension; it is a redirection of the existing pension to the reversionary pensioner.

Reversionary pensions are typically paid to surviving spouses.

Reversionary pensions work in a similar way to a BDBN. This means that creating a separate BDBN is only necessary when a reversionary pension direction is not in place and a fund member wants more control over what happens to their super benefits after death.

Categorised in: Firm journal

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