An issue that has been the subject of some debate over time is what takes priority where a valid binding death benefit nomination (BDBN) is in place, however the relevant member dies while in receipt of a pension which was established with a reversionary beneficiary.
Best practice dictates that both documents should ideally articulate which has priority, although often there is however ambiguity.
Where however there is limited guidance addressing the issue, it is generally accepted that the reversionary pension will take precedence over the BDBN.
The reasons for this include:
- A valid reversionary pension would automatically remove the deceased member’s death benefits from a fund, and therefore, any BDBN will have no assets to attach to.
- The Tax Office has confirmed via its national tax liaison group committee that the preferred interpretation (subject to any specific provisions to the contrary) is that the pension does take priority.
- Practically, in the client specific situations that we have seen, the approach adopted has always been that the reversionary pension takes priority.
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