How do Reversionary Pensions work?

How Do Reversionary Pensions Work

In Australia, a reversionary pension is a type of retirement income stream that continues to pay benefits to a nominated beneficiary, usually a spouse or a dependant, after the original pension holder (the primary member) passes away.

Here’s how reversionary pensions work:

  1. Initiation: The primary member of the pension (the original pension holder) starts the pension by converting their superannuation balance into a retirement income stream. They must meet the required age and retirement conditions to commence this income stream.
  2. Nomination: During the pension setup, the primary member can nominate a reversionary beneficiary. This person will receive the pension payments after the primary member’s death. Typically, the nominated beneficiary is the spouse or a financially dependent child.
  3. Death of the Primary Member: When the primary member passes away, the pension automatically reverts to the nominated beneficiary without the need to go through the process of establishing a new pension. The transition is generally seamless, and the beneficiary begins receiving pension payments according to the original payment frequency.
  4. Change of Reversionary Beneficiary: It’s important to note that reversionary beneficiaries can be changed, but it must be specified in the pension’s governing rules or pension documentation. If a change is desired, it’s crucial to update the nomination while the primary member is still alive and meets the legal capacity requirements.

Benefits of Reversionary Pensions:

  • The funds stay within the concessionally taxed superannuation environment
  • Continuity of Income: Reversionary pensions ensure a continuous stream of income for the nominated beneficiary, providing financial security after the primary member’s death.
  • Potential Tax Benefits: Depending on the beneficiary’s age and other factors, there might be tax advantages associated with reversionary pensions, especially for surviving spouses.


  • Estate Planning: Reversionary pensions are an essential part of estate planning as they can bypass the deceased member’s estate and potentially avoid probate and other legal complexities.
  • Impact on Age Pension: For reversionary pensions, the surviving beneficiary may need to assess the impact on their eligibility for the Age Pension, as the pension payments received could be considered income and assets for means-testing purposes.

It’s crucial to seek professional financial advice before establishing a reversionary pension, as the rules and implications can be complex, and individual circumstances can vary significantly. An experienced financial planner can help you understand your options.  Feel free to give your local Sunshine Coast Financial Planners, Mike Beal Financial Planning, a call on 0409 799 279.