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Your super represents your hard-earned money, and it’s important to decide who will receive it should you pass away.

Your beneficiary is the person you choose to receive your superannuation death benefit.

What are death benefits?

A superannuation death benefit is a payment made from a super fund to the beneficiaries of a deceased member. It consists of two main parts:

The total amount the deceased member had in their super account when they passed away.
If the member held death cover with their super fund, an insured death benefit (payable in accordance with the terms of the insurance policy the super fund held with its insurer). This is an insurance payout made by the super fund’s life insurer¹. Many super funds offer default life insurance that is automatically provided to members of a super fund, unless they choose to opt out.

Why you should nominate a beneficiary

Choosing a beneficiary is an important decision. Unlike other assets, your super does not form part of your estate – it is treated separately.

If you don’t nominate a beneficiary, your super fund’s Trustee will follow legal guidelines and their Trust Deed to work out who receives your superannuation death benefit.

Who you can nominate as your beneficiary

Under super law and the Trust Deed, superannuation death benefits must be paid to one or more of your dependants or the legal personal representative of your estate.

A dependant is defined as:

Your spouse.

This is a person, either same or different sex, who you are:

legally married to
not legally married to, but lives with you on a genuine domestic basis as a couple (in other words, a de-facto relationship).

Your child.

This includes (regardless of their age) an adopted child, a step child, an ex-nuptial child, a surrogate child recognised by the court, or your spouse’s child.

Your interdependents.

You’re considered to have an interdependency relationship if you live with someone in a close personal relationship and:

one or each of you provides the other with financial support, and
one or each of you provides the other with domestic support and personal care.

You may still be considered to have an interdependency relationship if you are only temporarily living apart.

If you have a close personal relationship with someone but you don’t live together or provide support or care, because either or both of you suffer from a physical, intellectual or psychiatric disability, you may still be considered to have an interdependency relationship.

Your legal personal representative. This is the executor of your will or the administrator of your estate. They are not considered a dependant, but can still be nominated as a beneficiary.

Types of nominations

You can make a binding death benefit nomination or a non-binding death benefit nomination. With Vanguard Super, you can also make a non-lapsing binding nomination.

Binding nomination

A binding nomination is legally ‘binding’ on the Trustee. As long as your nomination is valid at the date of your death, the Trustee will generally be bound to follow your instructions.

Binding nominations usually expire after three years. But some super funds – including Vanguard Super – offer non-lapsing binding nominations which don’t expire (but which you can still change or revoke if you want to at any time).

Non-binding nomination

A non-binding nomination is a way of sharing your wishes with the Trustee. It tells the Trustee how you’d prefer your death benefit to be distributed and in what proportions. The Trustee will take your preferences into account when deciding how to distribute your benefit in accordance with superannuation law.

However, it doesn’t guarantee that your death benefit will be paid exactly according to your wishes. For example, the Trustee may change the proportions, or may include other dependants (if applicable) not named in your nomination.

Non-binding nominations typically don’t expire (and this is the case with Vanguard Super). However, if your circumstances or preferences change, you can change or revoke your non-binding nomination at any time.

No nomination or invalid nominations

If you haven’t nominated any beneficiaries for your super before you die, or if your nomination is no longer valid, the Trustee must pay your benefit to:

your dependants, and/or
a legal personal representative.

If you have neither of the above when you die, the Trustee must pay your death benefit to any other person they determine, in accordance with superannuation law.

Tax on death benefit

The tax on a super death benefit depends on:

whether you were a dependant of the deceased under tax law
whether it is paid as a lump sum or income stream
whether the super is tax-free or taxable (and whether the super fund has already paid tax on the taxable component)
your age and the age of the deceased person when they died (for income streams).

Taxation of death benefits can be complicated. A good place to start is the ATO website.

When to update your beneficiaries

When and how you update any nomination of beneficiaries you make is up to you. And as explained earlier, depending on the type of nomination you make some may expire after a certain period of time and others may continue indefinitely.

A good rule of thumb is to check your nomination of beneficiaries whenever your personal circumstances change. For example, if you get married, register a relationship, get divorced, have children, change an interdependency relationship, start a new interdependency relationship, or if one of your nominated beneficiaries dies.

How to make a death benefit claim

Claiming a death benefit following the loss of a loved one will likely be a difficult time for you. If you need to make a death benefit claim on behalf of a deceased Vanguard Super member, we can help you through the process and keep you keep you informed about the claim’s progress.

The most important first step is to call us on 1300 655 101 (8:00am to 6:00pm AET, Monday to Friday) as soon as practicable, to start the claims process.

¹ It’s important to note that with Vanguard Super, a death benefit may not be paid in certain circumstances – these are known as ‘exclusions’, and most super funds apply them to death cover. An example of an exclusion with Vanguard Super is death caused by war, or your active service in military operations as part of the armed services. For more information on Vanguard Super exclusions, you can check out our Insurance in your super guide.

What happens to your super when you die?