Planning considerations

From the point of view of maximising the benefit of child pensions, the following general points can be made.  However, there may be issues other than maximisation of the benefit of child pensions which are also relevant and should be considered.

If a child pension can be paid before 1 July 2017 and there are two or more beneficiaries

Commence the pension before that date.  Commencing before 1 July 2017 will ensure that each child beneficiary will have a cap increment of $1.6m.  

If the pensions are commenced after that date, then each child beneficiary will same a single cap increment of $1.6m.

If you have child pensionable children  -  then commencing a pension on or after 1 July 2017 may restrict their cap increments

• If you have children under age 18 or between 18 and 25 who are financially dependent – then commencing a retirement pension from using only some (but not all of your superannuation interests) may restrict their cap increments to the value of your superannuation interests which are in retirement phase at the date of your death.  See Example 7

If you are in pension phase before 1 July 2017 and have child pensionable children

• Commuting the pension before 1 July 2017 and returning to accumulation phase before that date will mean that you will not have a transfer balance account at 1 July 2017.  
• If you have a transfer balance account on or after 1 July 2017, then any death benefits paid to your children as child pensions will have cap increment limited to the dollar value of your superannuation interests which are in retirement phase at the date of death or the dollar value of the then general transfer balance (whichever is the lesser).

If you have multiple super interest – some in pension phase and some in accumulation phase

• Accumulation phase interests – should be used to commence spouse pensions.
• Pension phase interests – should be used to commence child pensions.

Inadvertently being in pension phase and having child pensionable children

• As it is generally better not to have a transfer balance account if you die where you have child pensionable children – it is better to fully commute transition to retirement pensions before they “convert” to being ordinary account-based pensions.
• Once a transition to retirement pension converts on or after 1 July 2017 – you will have a transfer balance account and subsequently fully commuting that pension and returning to accumulation phase will not reverse that status.