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Superannuation
Superannuation (SMSF) document

SMSF Pension Pack

Use Cleardocs to create all the documents you need to set up a pension for your SMSF. The pensions available are:

  • simple pension; and
  • transition to retirement simple pension.

You can also use Cleardocs to create documents to record the commutation of your SMSF pension.

$346.50
  • Cleardocs fee incl GST $346.50
Product Benefits
  • Legal certainty with an agreement that formally documents the rules for payment of your retirement income stream
  • Pension and transition to retirement options
  • Nominate your reversionary beneficiary from the beginning of a pension
  • The SMSF does not require a Cleardocs deed to use this document package
  • Pre-population of Fund information from previous Cleardocs orders
  • Extensive online help and local phone support
  • Easy to use question interface
Product Information

What documents are included in the Cleardocs SMSF Pension agreement package?

The document package for the SMSF Pension set up includes:

  • the Pension Payment Agreement containing the rules under which the pension will be paid;
  • a Product Disclosure Statement summarising the features of the Pension Payment Agreement;
  • Application form - from fund member to fund trustee(s);
  • Minutes of the fund trustee(s) agreeing to pay the pension, and
  • an Establishment Kit explaining what to do next.

Tailoring the Pension Agreement to the SMSF

Once you become entitled to be paid a lump sum benefit, the Cleardocs SMSF Pension Pack provides a set of documents that give you all you need to pay your benefit as an income stream. The Pension Payment Agreement package allows you to:

  • choose what type of pension you receive;
  • choose when and how you receive the pension and change that at a later date;
  • choose when you receive pension information from the trustee;
  • "commute" the pension in certain circumstances - that is, change it so that you receive a lump sum; and
  • nominate a reversionary beneficiary to receive the pension after you die.

The fund does not require a Cleardocs deed

To use the Cleardocs Pension Pack, the SMSF does not require a Cleardocs deed. We strongly recommend that you update to the latest version of the Cleardocs deed to ensure consistency between the fund's deed and the Pension Payment Agreement.

Background to the Cleardocs SMSF Pension Pack

When you become entitled to be paid a lump sum benefit, the SMSF trustee(s) may allow you to choose to receive that lump sum in the form of regularly paid income — this is called a pension.

You need to understand broadly how each pension type operates so you can decide the right pension for you. Different types of pensions operate differently and will impact on you differently. Please discuss this in detail with your adviser before you select the pension you would like to receive. We cannot give you that advice.

Need more pension documents?

If you would like to change any of the documents or to arrange a different type of pension, then you can order a Cleardocs Pension Pack and then arrange for Maddocks to amend it to meet your needs. This is cheaper than asking Maddocks to create your version from scratch. Start by calling Cleardocs on 1300 307 343 and we will direct you to the relevant lawyer at Maddocks to begin the process.

Auto-populate answers using your existing BGL account

Integration with BGL Simple Fund 360 allows you to pre-populate your Cleardocs orders with existing BGL fund information. In order to pre-populate your answers, start a new order on the Cleardocs website and then click on "Use details from BGL Simple Fund 360" when the question interface gives you the option to auto-populate your answers.

The Cleardocs system then:

  • directs you to the BGL website to log in with your credentials and authorise Cleardocs to access your fund information;
  • returns you to the Cleardocs interface and prompts you to choose your preferred BGL document fund from a drop down box; and
  • pre-populated the interface with your BGL fund information.

For privacy reasons, Cleardocs does not have access to any of your BGL login details. BGL only provides Cleardocs with certain contact information.

Seek legal advice

The SMSF Pension Pack information here should be considered general in nature, and in no way interpreted as legal advice. You must always seek your own independent legal, accounting and financial advice about your particular situation. The summary on this page is for information purposes only.

Frequently Asked Legal Questions

Cleardocs is not a law firm. So as with all the legal material on this site, the answers to these "frequently asked legal questions" are provided by the law firm Maddocks. Cleardocs does not endorse those answers.

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What types of pensions does the Pension Pack cater for?

The pension pack caters for simple pensions (also known as "accounts-based pensions".) and transition to retirement simple pensions.

How does the pension commence?

The first pension payment may be made in advance or in arrears. If:

  1. It is made in advance then the pension commences on the date the first payment is made; and
  2. It is made in arrears then the 'commencement day' is the first day of the period to which the first pension payment relates: that is, if the first pension payment is to be made six months in arrears, then the 'commencement day' would be 1 July 2007 and the first pension payment would have to be made on 31 December 2007.

Does the Pension Pack cater for segregating assets used to fund the pension?

The pension pack does not prohibit segregating assets, but this is a matter which the trustee and member must agree between themselves, and in accordance with the relevant fund's trust deed.

Do I need an actuarial certificate?

Click here to read the ATO's fact sheet on this topic.

Basically, if the assets are segregated, then no actuarial certificate is needed (provided the fund is not paying any pension other than a market-linked pension or simple pension). If the assets are unsegregated, then an actuarial certificate is required.

Can I add assets to the assets which are funding my pension?

No. No additional capital contributions can be made to the assets funding the pension. Only interest and earnings on the current assets being used to fund the pension can be added to the assets funding the pension.

What happens to my transition to retirement pension when I retire?

With market-linked pensions, nothing changes except that some additional restrictions on commuting the pension are lifted.

With simple pensions, the position is a little unclear. The additional restriction on transition to retirement simple pensions is that there is a maximum amount that can be paid each year — there's no maximum for a normal simple pension. When you retire, unfortunately the legislation does not (at the moment) automatically lift this 'maximum limit'. It may be necessary to commute the pension and start a new normal simple pension.

If a self managed superannuation fund (SMSF) member dies and they have a reversionary pension and a death benefit agreement or nomination, which takes priority?

Overview

This answer for this FALQ sets out what happens for an SMSF member — using Cleardocs documents — who dies with both of the following in place:

  • a pension that names a reversionary beneficiary; and
  • a death benefit arrangement — it can be either a Death Benefit Nomination (binding or non-binding) or a Death Benefit Agreement. (See the end of this article for an explanation of the difference.)

To determine which of the arrangements takes priority, you must follow the terms of the relevant documents. The documents could include one or more of the following:

  • a SMSF deed;
  • a Death Benefit Notice;
  • a Death Benefit Agreement; or
  • a Pension Payment Agreement.

Further, all of these documents should be considered alongside the member's will so that you have the full picture: this is because a death benefit arrangement may direct the trustee to pay super benefits into the deceased's estate and those benefits will then be dealt with in accordance with the terms of the will.

To confirm the position for a particular member, you should seek legal advice.

The general position

If Cleardocs documents are in place, then generally the following arrangements apply.

If the Member has a Pension Payment Agreement that names a reversionary beneficiary, then after the member dies, the trustee must pay the pension to the reversionary beneficiary named in the schedule of the Pension Payment Agreement. So if the reversionary beneficiary is a pension dependant, then any Death Benefit Notice or Death Benefit Agreement has no effect in relation to that pension.

However, the following factors also need to be considered (and are dealt with below):

  • at the time of the member's death, the reversionary beneficiary must be a "pension dependant" (explained below) of that member;
  • what happens when the reversionary beneficiary dies;
  • there may be no reversionary beneficiary named in the Pension Payment Agreement; and
  • superannuation benefits other than those funding payment of the pension

What is the meaning of a "pension dependant"?

The meaning of a "pension dependant" is best understood by first considering the meaning of "dependant" and then adding the meaning of "pension dependant". Here goes.

To be classified as 'dependant' under section 10 of the Superannuation Industry (Supervision) Act 1993 (SISA), the person must be in a 'interdependency relationship' with the member or be the member's spouse or child. Two people, whether related or not, are treated as being in an 'interdependency relationship' if:

  • they have a close personal relationship; and
  • they live together; and
  • one or each of them provides the other with financial support; and
  • one or each of them provides the other with domestic support and personal care.

To be classified as a 'pension dependant' and as a result be entitled to receive a pension on the death of a member, you must not only be a 'dependant' but also, in the case of a 'dependant' who is a child of the deceased, be:

  • less than 18 years of age; or
  • be 18 or more years of age and less than 25 years of ageand be financially dependant on the member; or
  • have a disability of the kind described in subsection 8(1) of the Disability Services Act 1986.

What if the reversionary beneficiary is not a "pension dependant"?

If at the time of the member's death, the reversionary beneficiary is not a "pension dependant" (explained above) of that member and the member has a valid Death Benefit Notice or Death Benefit Agreement, then the trustee must follow the instructions in that Notice or Agreement.

If the member does not have a valid Death Benefit Notice or Death Benefit Agreement, then the trustee must deal with the member's account in accordance with the SMSF deed and superannuation law. Generally, under the Cleardocs documents, this would require the trustee to pay or apply the relevant benefits in the way the trustee thinks fit, in accordance with the following rules:

  • If the member or beneficiary has left dependants , then the trustee must pay or apply the benefit to or for the benefit of any one or more of the dependants of the member or beneficiary and the legal personal representatives of the member or beneficiary.  The trustee may do so in any proportions the trustee thinks fit and may take into account a member's wishes contained in a non-binding nomination form.
  • If the member or beneficiary has not left any dependants but does have a legal personal representative, then the trustee must pay the benefit to the legal personal representatives of the member or beneficiary.
  • If the member or beneficiary has not left any dependants and has no legal personal representative, then the trustee may pay or apply the benefit to or for the benefit of any individual at the trustee's discretion. The trustee may do so in any proportions the trustee thinks fit.
  • If the trustee has not paid or applied the benefit to or for the benefit of any person described above, then the trustee must treat the benefit as a forfeited benefit entitlement.

What happens when the reversionary beneficiary dies?

If permitted by the trustee, the reversionary beneficiary may — once they have started receiving the pension — give the SMSF trustee(s) a written Death Benefit Notice specifying which of the beneficiary's dependants is to receive their account balance on their death. The Death Benefit Notice must be in accordance with superannuation law. If the reversionary beneficiary has done that, then the trustee must pay the account balance in accordance with the reversionary beneficiary's Death Benefit Notice.

If the reversionary beneficiary does not have a Death Benefit Notice, then the reversionary beneficiary's account is dealt with in accordance with the SMSF deed and superannuation law. Generally, under the Cleardocs documents, this would require the trustee to pay or apply the relevant benefits in the way the trustee thinks fit, in accordance with the following rules:

  • If the member or beneficiary has left dependants, then the trustee must pay or apply the benefit to or for the benefit of any one or more of the dependants of the member or beneficiary and the legal personal representatives of the member or beneficiary. The trustee may do so in any proportions the trustee thinks fit and may take into account a member's wishes contained in a non-binding nomination form.
  • If the member or beneficiary has not left any dependants but does have a legal personal representative, then the trustee must pay the benefit to the legal personal representatives of the member or beneficiary.
  • If the member or beneficiary has not left any dependantsand has no legal personal representative, then the trustee may pay or apply the benefit to or for the benefit of any individual at the trustee's discretion. The trustee may do so in any proportions the trustee thinks fit.
  • If the trustee has not paid or applied the benefit to or for the benefit of any person described above, then the trustee must treat the benefit as a forfeited benefit entitlement.

What if no reversionary beneficiary is named in the Pension Payment Agreement?

If a reversionary beneficiary is not named in the pension document and the member has a valid Death Benefit Notice or Death Benefit Agreement, then the trustee must follow the instructions in that Notice or Agreement.

What if the member has both a Death Benefit Agreement and a binding Death Benefit Nomination?

In these circumstances the Death Benefit Agreement prevails over any binding Death Benefit Notice (and any Non-binding Nomination Form). This means that the trustee must pay, or apply, the relevant benefit in accordance with the rules set out in the Death Benefit Agreement.

What if there are other superannuation benefits?

Don't forget that this FALQ deals only with what happens to a pension being paid to the member/beneficiary.

The member may also have other super benefits still in accumulation phase. Any death benefit arrangement will still be relevant to these benefits (even if they're not relevant to the pension).

How are pension payments to children to be treated?

If the pension is paid to a child of the member or of the later reversionary beneficiary, then the pension must be cashed to a lump sum — unless on the day it is to be cashed, the reversionary beneficiary has a disability of the kind described in section 8(1) of the Disability Services Act 1986.

What is the difference between a Death Benefit Notice and a Death Benefit Agreement?

The difference between a Death Benefit Notice and a Death Benefit Agreement is explained in this table:

Option Binding or non-binding Expiring or "permanent"
Death Benefit Nomination Member chooses

A non-binding Nomination last until revoked or replaced

A binding nomination expires by law after 3 years. (There is some controversy about this point. You can read an article here by our lawyers at Maddocks about why they believe the three year limit applies.)

Death Benefit Agreement Always binding Always permanent until the member revokes or replaces the Agreement

You can read about the Cleardocs

Does the Pension Pack take into account the recent changes in the law related to COVID-19?

Yes, the pension documents permit the trustee to make half the usual minimum annual pension payments in accordance with the superannuation law changes made as a result of COVID-19.

The pension documents also permit the trustee to commute a pension back into an accumulation account for the purposes of commuting a Transition to Retirement Income Stream so that a lump sum can then be released from the accumulation account as part of the early access to super arrangements permitted under a COVID-19 determination.


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