Need to know
- If you die with superannuation remaining, your super fund must pay this money to your beneficiaries
- You can nominate who you want your money to go to, but in some cases the fund has the discretion to decide who to pay
- Super Consumers Australia says the process should be straightforward and clearly communicated by your fund
What is a death benefit?
A death benefit is made up of any super you have left over when you die and any life insurance you had through your super fund. After you die, your super fund must pay your death benefit to one or more eligible beneficiaries.
People who are eligible to receive your super include:
- your current spouse or partner
- your children
- someone who is in an interdependent relationship with you
- anybody financially dependent on you when you die
- your estate or legal personal representative.
What is a death benefit nomination?
Most super funds allow you to choose who your money gets paid to when you die (your beneficiaries). This is called making a death benefit nomination. Many people assume that your will dictates where any remaining super goes, but this isn't the case. It's easy to overlook making a nomination and the process can be confusing.
Binding vs non-binding nominations
Death benefit nominations in super may be binding or non-binding. A binding nomination means your super fund must pay the money to the people you nominate and in the proportion you choose. If you make a non-binding nomination, your fund will consider your wishes, but will make a decision based on what it thinks is fair based on the circumstances at the time of your death.
Each fund can decide what types of nominations to offer. Most funds offer both.
Lapsing vs non-lapsing nominations
Nominations can be lapsing or non-lapsing. A non-lapsing nomination stays in place until you make a new one or you die. Non-binding nominations usually do not lapse.
A lapsing nomination can last for up to three years. You can then renew the nomination or make a new one.
Most funds only offer lapsing nominations, though non-lapsing nominations are becoming more common.
Why do nominations lapse?
The logic is that your circumstances change over time, and a person's original nomination may no longer reflect their wishes. For example, you may have a new baby or your relationship may have ended.
If you made a binding nomination and it lapses, but you don't renew, most funds will treat it as a non-binding nomination.
ASIC's 2025 death benefits review revealed that some funds take a much more proactive approach to nominations than others. Better practice is for funds to contact members several months before the nomination expires, allow members to renew online and also let them know when the nomination lapses if it's not renewed.
Better practice is for funds to contact members several months before the nomination expires, allow members to renew online and also let them know when the nomination lapses
In 2021, Super Consumers Australia talked to a number of funds to see what they do to remind members to renew their nominations. Some of the funds said they're proactive about informing members if their nomination is about to lapse. MLC said it sends members a notice to renew (if appropriate), and the status of the nomination is also shown on each annual statement.
Similarly, Aware Super statements include an 'Action alert' if a nomination has lapsed or is about to lapse.
A spokesperson for Sunsuper (now Australian Retirement Trust) said fund members can see the status and expiry date of any nomination they've made on the online dashboard or in their annual statement. The fund also contacts members 90 days before a nomination lapses, and again if the nomination does lapse.
Invalid binding nominations
Super funds only have to follow a binding nomination if it's valid at the time of your death.
For a lapsing nomination to be valid:
- it must be in writing on paper (funds will have a form to complete)
- it must be signed by you in the presence of two witnesses
- the witnesses must be adults and they can't be your beneficiaries
- the witnesses must both sign
- it must be dated
- the beneficiaries must be eligible to be paid the money
- the form must be complete (e.g. the different proportions need to add up to 100%)
- you must mail the completed form to your super fund.
Funds can set their own rules for non-lapsing binding nominations. These nominations are not valid until they are accepted by the fund. You will need to check with the fund to find out what is required. For example, some funds allow them to be made online.
You can usually download a nomination form from your fund's website or contact them for more details.
What if I want to nominate someone who isn't eligible?
You can't nominate just anyone to be a beneficiary. A beneficiary can only be a legal personal representative or a dependent, which includes a spouse, a child or someone you're in an interdependent relationship with.
This rule means you can't nominate someone like a parent, sibling, grandchild or friend unless they're dependent on you – or you're dependent on them – at the time of your death.
If you want to ensure your death benefit goes to someone who isn't a dependant, you can nominate your legal personal representative (executor of your will) to receive your death benefit, which will then get paid in accordance with your will. You may want to seek advice on drafting your will and any tax implications.
What happens if you don't have a valid binding nomination when you die?
Most super funds have discretion to decide who to pay your death benefit to if you don't have a valid binding nomination in place. Some funds must pay the benefit to your estate.
Having your super fund decide where your money goes may sound alarming, but there are still rules about how they make this decision.
Super funds can still only pay an eligible beneficiary if there is one. That means the fund will have to collect information about who is eligible and make a decision about what is fair in the circumstances. If more than one person makes a claim for the death benefit, the fund will have to consider each claim and will generally offer each person an opportunity to complain if they aren't happy with the decision that the fund is proposing.
If more than one person makes a claim for the death benefit, the fund will have to consider each claim and will generally offer each person an opportunity to complain
A spokesperson for Aware Super says it'll look at the late member's death certificate to see if they had a spouse or any children. The fund will also use any invalid or non-binding nomination as a guide. Further, the fund can refer to any discussions the member had with a financial planner at the fund. Finally, it can contact potential beneficiaries for further information.
"Disputed death benefits are rare," says a spokesperson for Aware Super. "We do work hard to try and make that process as transparent and straightforward as possible."
The approach at HOSTPLUS is similar; the fund will consider any beneficiaries it can identify from the deceased's finances, the person's will and any non-binding nomination they made. Finally, the fund will bear in mind "the purpose for which death benefits are provided for" in this context, which is, broadly speaking, to assist any people who were financially dependent on the person who died.
If you die with no dependants, the money will generally go to your estate. Super funds can pay someone else if there are no eligible dependants and there is no legal personal representative.
Funds have to make the process clear
Given the importance of leaving your money to the right people after you die, Super Consumers Australia CEO Xavier O'Halloran says funds have a responsibility to help people make valid nominations.
"We had a person contact us recently who was completely confused by what her fund had told her. This led us to have a much closer look at how funds are communicating with their members about what happens to a person's super when they die."
Disputes over how a super fund distributes the money
If you're unhappy with how a fund is distributing a loved one's death benefit, you can contact the fund in the first instance.
If you're still not satisfied, you can complain to the Australian Financial Complaints Authority (AFCA). AFCA has the power to make super funds change their decisions on who gets the money.
While the AFCA process is designed to be quicker and easier than going to court, having a tribunal dig into your family's relationships and finances may be a stressful process. It can also take much longer than if a valid nomination was in place.
Bethany's story
Bethany is a CHOICE member who contacted us after she couldn't get answers from her fund, Australian Super, about its death benefit nomination process.
One of the fund's forms noted that they would use "their discretion" to distribute any remaining super if members died without a valid nomination.
"There is no explanation on the form as to what 'their discretion' means or if there's a cost to it," Bethany says. "I have no choice but to sign the form with this clause and another clause that I knowingly agree to [the fund exercising its discretion], and understand it. Well, I don't!"
There is no explanation on the form as to what 'their discretion' means or if there's a cost to it
CHOICE member Bethany
Bethany also sought more information from the fund on why it only allowed lapsing nominations. She says the only reply was "It's a fund rule", and the staff member she spoke to couldn't find any information about how the fund would use its discretion.
In an email to Super Consumers Australia, an Australian Super spokesperson said it would consider the member's wishes but would use its discretion when paying out an account balance and any insurance.
"The Fund works within the strict legal guidelines to determine who receives a payment," the spokesperson said.
Taking the stress out of death benefit nominations
The best way to have peace of mind about where your money goes after your death is to have a valid nomination in place.
The key things to remember are:
- you can either leave super to a dependant or to a legal personal representative (which allows for your super to become part of your will)
- your nomination may lapse (usually after three years). When this happens your nomination can still be used as a guide by your fund, but your fund doesn't have to follow it. Renew it for greater peace of mind
- making a valid nomination can be very technical; talk to your fund if you're unclear about the process or how to make a valid nomination.
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Stock images: Getty, unless otherwise stated.
