Beneficiary nominations at ESSSuper

In this month’s episode we are joined by Matt Cervetto from our Member Education team to discuss beneficiary nominations.  Having a valid beneficiary nomination in place is an important step in taking control of your super.  Hear from one of our experts and get an understanding of what beneficiary choices are available, how they work and what steps you need to take in order to register a nomination.

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Emergency Services Superannuation Board ABN 28 161 296 741 the Trustee of the Emergency Services Superannuation Scheme ABN 85 894 637 037 (ESSSuper). The information contained in this article is of a general nature only. It should not be considered as a substitute for reading ESSSuper's Product Disclosure Statement (PDS) that contains detailed information about ESSSuper products, services and features. Before making a decision about an ESSSuper product, you should consider the appropriateness of the product to your personal objectives, financial situation and needs. It may also be beneficial to seek professional advice from a licensed financial planner or adviser. An ESSSuper PDS is available at esssuper.com.au/pds or by calling 1300 650 161.

Transcript

00:00:02 Speaker 1 

You're listening to exploring super the exclusive podcast for ESSSuper members. 

00:00:11 Christian 

Welcome to exploring Super, the exclusive podcast for ESSSuper members. 

00:00:16 Christian 

My name is Christian Kueng and I'm the manager of member education at ESSSuper. 

00:00:20 Felicity 

And I'm Felicity Brasher, the group executive of member engagement here at ESSSuper. Today we're looking at what happens to our super if we die and the importance of having a beneficiary nominated for your super. A lot of our Members focus on building up their superannuation benefits, but they don't always give quite the same amount of attention to how those benefits will be distributed when they're no longer around. So here we have today the very, very lovely Matt Cervetto to provide some general information about beneficiary nominations. Welcome, Matt. 

00:00:54 Matt 

Thanks, Felicity. I appreciate the invitation. 

00:00:56 Felicity 

We might kick off with a really uplifting question, Matt. What happens to our superannuation when we die? 

00:01:03 Matt 

Yeah. Thanks for the question. But before I answer it, I think it really is important to advise our members that ESSSuper does have a range of different funds and accounts and we would always recommend to members. 

As a starting point to log into the ESSSuper website and have a look at the relevant product disclosure statement or handbook related to their particular account or scheme, and there are also some fact sheets there that provide members with some additional information as well. 

00:01:28 Felicity 

Yes. 

00:01:34 Felicity 

There's some great tips right there. 

00:01:35 Matt 

So what happens to a member super when they pass away? Well, like most super funds, ESSSuper provides members with the option of nominating a beneficiary on their particular account or their fund if they don't make a nomination. Importantly, they then leave that decision with the ESSSuper Board as to how those funds are going to be distributed, so who a member nominates and the type of nomination they make. 

00:01:59 Felicity 

Right. 

00:02:04 Matt 

Can also impact on the benefit that's paid out. 

00:02:07 Felicity 

OK. 

00:02:08 Matt 

So we're going to talk about those options in a bit more detail. 

00:02:11 Christian 

Thanks, Matt. So you mentioned there that there can be a different benefit payable depending on who you've nominated. So can perhaps give us a bit of detail about who can we actually nominate? 

00:02:20 Matt 

Sure, Christian. So Members have a number of options here and the first of those is to nominate an individual. However, if a Member's nominating an individual, they need to understand that that individual must fall into a certain classification, OK. And generally, a member can only nominate either a spouse or a de facto partner. 

00:02:35 Felicity 

Mm-hmm. 

00:02:41 Matt 

A child or someone who's partially or wholly financially dependent on them. 

00:02:47 Christian 

OK. 

00:02:47 Matt 

For Members who may not have anyone in those categories, or they may have complex or specific instructions, then we also provide members with the option of nominating their estate or what we refer to as their legal personal representative, right? Mm-hmm. And in this situation. 

00:03:06 Matt 

What we will do when the Member passes away is we will actually pay their benefit to the executor that they've nominated in their will and that person or persons will then distribute the benefit in line with the instructions that a Member's put in that document.  Importantly, if a member does nominate. 

00:03:14 Felicity 

Right. 

00:03:26 Matt 

Their estate they do do need to ensure that their will is kept up to date and that it continues to reflect their wishes. Mm-hmm. But like all rules, there are exceptions. And at ESSSuper for our emergency services members only they do have an additional option. 

00:03:45 Matt 

For those Members that don't have a dependent beneficiary, they can nominate what we refer to as a personal nominated representative, and this is a natural person, which normally would be either a parent or a sibling,  

00:04:01 Felicity 

Matt, you've explained really well about who we can nominate. Maybe you can step us through how we actually nominate a beneficiary. 

00:04:10 Matt 

Yeah, absolutely, Felicity. However, before we do that, I think it's important that before Members provide their instructions to ESSSuper, they do need to consider another option. And that is the type of nomination that they're going to make to the Super Fund, generally speaking, beneficiary nominations can be made as either non binding or binding nominations. 

00:04:35 Felicity 

Right. OK. 

00:04:37 Matt 

So let's talk about the difference between the two. 

00:04:39 Matt 

So non binding nominations are when a member provides their instruction to the Super Fund. However the Super Fund, whilst taking into account that instruction, are not bound by the Members instructions and the Superfund board actually retains discretion as to how those benefits are going to be paid. 

Whilst taking into account the members instruction OK, it's reasonably rare that we'll vary the members instruction. However, we are leaving that final decision with the ESSSuper Board. 

00:05:13 Felicity 

OK. 

00:05:14 Matt 

To make a non binding nomination, it's a reasonably straightforward process. Members need to log in to their members online account through the website, click on the beneficiaries tab and update those instructions. 

00:05:27 Matt 

And they will stay in place until the member changes them. The accounts closed, or indeed the member passes away, of course. 

00:05:35 

Mm-hmm. 

00:05:36 Matt 

The other option for members is to make a binding nomination and as the name suggests, this instruction is binding on the Super Fund, so it locks ESSSuper into the instruction that a member provides. 

00:05:52 Matt 

However, making a binding nomination is a little bit more complicated. A member still has to log in to their members online account, but once they're in there they need to download a form. 

00:06:03 Felicity 

OK. 

00:06:04 Matt 

And that form needs to be completed, signed and at the time it's signed, needs to be witnessed by two people who are over 18 and who are not the nominated beneficiary. OK. And because it's a witness document, that form needs to be sent to ESSSuper. We must have that original piece of paper. 

00:06:15 Felicity 

Makes sense? 

00:06:23 Matt 

Sure. Another difference between binding and non binding nominations is that a binding nomination actually only has effect for a period of three years. 

00:06:33 Felicity 

Yes. 

00:06:34 Matt 

So prior to that three-year period lapsing ESSSuper will contact the member to let them know it's coming due. 

00:06:40 

Hmm. 

00:06:42 Matt 

And a member then needs to log into their online account and simply click a button to roll that nomination over for another three years. Excellent. Yeah. Yeah. If they forget that date, unfortunately, they'll need to go back and complete a form all over again, as I mentioned earlier there are some different rules and regulations that relate to the different funds and schemes in ESSSuper. 

00:07:07 Felicity 

Yeah. 

00:07:07 Matt 

So you do need to check on the handbook or the product disclosure statement to determine if there are any particular restrictions around the types of nominations you can make on your account. 

00:07:19 Christian 

OK. Thanks Matt. 

00:07:20 Christian 

So you've mentioned you know non binding nominations, binding nominations etcetera. Are there any other types of nominations that people can make? 

00:07:27 Matt 

Yeah, that's the case, Christian, for those members that may have an income stream in addition to making a non binding or a binding nomination. 

00:07:35 Matt 

They also have the ability to nominate what we refer to as a reversionary beneficiary nomination. OK, now this can only be their spouse or partner. And what happens if they make that nomination is at the time they pass away. We will take their income stream and we will flip it over to the surviving spouse or partner. 

00:07:55 Matt 

And they will then have that account, OK, importantly, this can also provide the surviving spouse or partner. 

00:08:03 Matt 

With additional time to manage their superannuation within the government imposed transfer balance cap. 

00:08:11 Felicity 

OK, so Mastt, you've covered off on the income stream members, but we've got quite a number of state super members who've got lifetime pensions. Are they able to make a reversionary nomination or is there a different rule again for them? 

00:08:27 Matt 

Yes, that's a really good point, Felicity. And for those Members who are in receipt of lifetime pensions, There are different rules. 

00:08:34 Felicity 

OK. 

00:08:35 Matt 

And their options are a little bit limited because. 

00:08:38 Matt 

The options available to members in receipt of a lifetime pension are generally. 

00:08:43 Matt 

Enshrined in state government legislation. 

00:08:46 Felicity 

Right. OK. 

00:08:47 Matt 

However, should they wish to make a nomination because of those existing rules, they are only able to make a non binding nomination on those accounts. 

00:08:56 Felicity 

OK. 

00:08:57 Christian 

OK Matt, so we've talked about, you know, who we can nominate, how we go about nominating some differences between binding, non bindings, pensioners and so on. What are the other considerations that you'd think would be, you know, really important for Members to know when they're making a beneficiary nomination? 

00:09:11 Matt 

A really important issue for Members to consider is how their benefits may be treated for tax. At the time they pass away. 

00:09:19 Christian 

OK. 

00:09:20 Matt 

So how this is determined is whether the benefit is paid to what's known as either a dependent beneficiary or a non dependent beneficiary. OK, now a spouse or partner. 

00:09:26 Felicity 

Mm-hmm. 

00:09:32 Matt 

Or a financial dependent will always be considered as a dependent beneficiary and they will receive any benefit free of any tax. However, if a child is nominated The Super Fund has to determine at the time the member passed away as to whether that child is a dependent or a non dependent. Now there are some rules around this. 

00:09:53 Felicity 

OK. 

00:09:54 Felicity 

OK. 

00:09:57 Matt 

So for children under 18, they're always considered to be dependent. However, if they're aged over 18, then if they're between 18 and 25, they either need to be a full time student. 

Or they need to be partially or wholly dependent on the member. In the event they're not dependent and a benefit is paid to them, then the Super Fund or the executor is required to deduct tax from that benefit before it's paid to that child.  

So there are some financial planning strategies that Members may want to investigate. 

Meat as a way of managing that potential tax liability. 

So we do recommend that Members seek financial planning advice and of course Phil and the team at ESSSuper are more than happy to assist members as well. 

00:10:49 Felicity 

That's great, Matt. Thank you. So I guess the the last question from us here today is where should the Members go from here? What should they do next? 

00:10:58 Matt 

Yeah. Thanks, Felicity. So the first thing we'd recommend to members is as I mentioned. 

before log into the ESSSuper website, go into your members online account and confirm the instructions that you've currently provided to ESSSuper again. There are resources via the product disclosure statements and handbooks to understand exactly what the options are relative to your particular fund or account. Yeah, if it's still confusing from there, the Member education team at ESSSuper offer general advice, so feel free to contact the fund and make an appointment with one of the team. 

00:11:30 Felicity 

Yes. 

00:11:36 Matt 

And of course, there's always the ability to seek specialist financial planning or legal advice if a Member thinks they have complicated situations. 

00:11:46 Felicity 

Right. 

00:11:48 Matt 

Like anything to do with finances, we recommend Members review their beneficiary nominations on a regular basis to make sure that if their circumstances change, their instructions continue to meet their wishes. 

00:12:01 Felicity 

That's some really great advice there. Thank you. So that wraps up our episode today of exploring Super the exclusive podcast for ESSSuper members. 

00:12:02 Christian 

Yeah, that's excellent. Thanks, Matt. 

00:12:10 Felicity 

Thanks again Matt for coming in. Yeah, thanks, Matt. We look forward to producing more content for you at ESSSuper proudly serving our members. If you'd like more information about our investment and products, please go to esssuper.com.au 

00:12:13 Matt 

My pleasure. 

00:12:29 Felicity 

This podcast is of a general nature only it should not be considered as a substitute for reading the relevant ESSSuper product disclosure statement that contains detailed information in regard to products, services and features. 

Estate planning is a complex area and the board recommends you consult a qualified estate planning adviser before implementing or changing your beneficiary nominations. Taxation and superannuation is federal law and subject to federal legislation changes. Before making a decision about an ESSSuper product, you should consider the appropriateness of this product. 

To your personal objectives, financial situation and needs, it may also be beneficial to seek professional advice from a licensed financial planner or advisor and ESSSuper product Disclosure statement is available at esssuper.com.au