There seems to be some confusion amongst commentators as to the virtues of reversionary v non-reversionary pensions from 1 July 2017. If the only issue to be considered is tax, reversionary pensions must win. Consider the following scenario;

Jack & Rachel are both 66 with a $1.6m balance each in pensions. Jack dies in August 2017. By then they will have each booked the $1.6m transfer balance cap and transfer balance amount.

If Jack’s pension is not reversionary it will cease on his death. Rachel will not be able to start a death benefit pension unless she first commutes her pension to accumulation. If she does this the $3.2m will remain in super but half will be in accumulation from Jack’s date of death. If she does not she will need to withdraw Jack’s death benefit as a lump sum as soon as practicable. Incidentally this would have been the result if Jack had not been in pension at all.

If Jack’s pension had been reversionary then both pensions may continue for a year until Rachel needs to make the choices above. This will entitle Rachel to an extra year of exempt pension income.