Difference Between Binding and Non-Binding Nominations

Through the use of a superannuation nomination form, an individual has the ability to nominate which of their beneficiaries will receive their superannuation or pension balance in the event of their own death.

A superannuation nomination can be Binding or Non-Binding.

The meaning of binding and non-binding is explained below.

While many superannuation funds will offer both Binding and Non-Binding beneficiary nominations to members, some superannuation funds only provide a member with the ability to make Non-Binding nominations.

This article discusses the difference between Binding and Non-Binding nominations, including non-lapsing Binding Nominations.

Why Make A Superannuation Nomination?

Unlike personally-owned assets, superannuation and pension savings are not paid via a person’s Will in the event of their death. This is because the legal owner of the superannuation or pension balance is the trustee if the superannuation fund. The member is only the beneficial owner.

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Therefore, it is the Trustee’s decision of how superannuation or pension balances will be paid upon the death of the member and who the beneficiary will be, taking into account the members circumstances and relationships at the time of death.

However, a member can make a Binding or Non-Binding nomination to the trustee while still alive to direct the trustee on how they would like their benefits paid in the event of death and who the binding or non-binding beneficiary will be.

Difference Between Binding and Non-Binding Beneficiary Nominations

The difference between Binding and Non-Binding beneficiary nominations is that one is binding on the trustee and one is not.

As the name suggests, a Binding Nomination is binding on the trustee. This means that a trustee is unable to use their discretion when paying death benefits to beneficiaries of a deceased member; the trustee must pay the member’s balance strictly as nominated on the Binding Nomination.

A Non-Binding Nomination on the other hand is more of a ‘wish list’. It tells the trustee how a member would like their benefits distributed, but leaves ultimate discretion with the trustee, taking into account the member’s relationships at the time of death.

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Non Lapsing Binding Death Benefit Nomination

A standard Binding Death Benefit Nomination expires three years from the date that it was initially put in place.

The reason behind this is because people generally aren’t as consistent at updating their superannuation nominations as they are at updating their Wills, which risks superannuation proceeds not being paid in accordance with their wishes and relationships at the time of death.

However, more recently, some superannuation funds, including self managed superannuation funds (SMSF), have made it possible for a member of the fund to put in place Non-Lapsing Binding Nominations. A Non-Lapsing Binding Nomination is the same as an ordinary Binding Nomination, without the 3-year expiry date (i.e. it does not lapse).

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Binding Death Benefit Nomination Advantages

The advantages of Binding Death Benefit Nominations include:

  • Certainty over who will receive superannuation proceeds in the event of death;
  • Removes trustee discretion;
  • Ability to nominate any beneficiary as defined in the Superannuation Industry Supervision (SIS) Act; and
  • Can work well with an overall estate plan for blended families, mixed families, extended families and second/subsequent marriages.


Binding Death Benefit Nomination Disadvantages

The disadvantages of Binding Death Benefit Nominations include:

  • Forgetting to update the Binding Nomination may result in super and pension savings being paid to the wrong people in the event of death;
  • Trustee is unable to use discretion as to who benefits are paid to, even if they know circumstances have changed since the Binding Nomination was originally submitted;
  • Generally expire every 3-years and need to be resubmitted to the trustee, unless a Non-Lapsing Binding Nomination was put in place; and
  • Not offered by all superannuation funds.


Non-Binding Death Benefit Nomination Advantages

The benefit of Non-Binding Death Benefit Nominations include:

  • Trustee is able to distribute superannuation and pension proceeds given the member’s relationships at the time of death and taking into account the member’s wishes at the time of death;
  • No expiry date; and
  • Ability to nominate any beneficiary as defined in the Superannuation Industry Supervision (SIS) Act.


Non-Binding Death Benefit Nomination Disadvantages

The disadvantages of Non-Binding Death Benefit Nominations include:

  • No certainty of who will receive superannuation and pension benefits in the event of death, as ultimate discretion lies with the trustee of the superannuation fund.

Superannuation binding and non-binding nominations do not apply to reversionary pensions.

Reversionary pensions automatically revert to the reversionary beneficiary upon death of the original pension owner.

The reversionary pension balance then count towards the beneficiary’s transfer balance cap.

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Superannuation Beneficiary Rules

Upon the death of a superannuation member, their remaining superannuation or pension benefits cannot be paid to just anyone.

Superannuation death benefits must be paid to a ‘dependant‘ as defined by the Superannuation Industry Supervision (SIS) Act. A dependant under this definition includes:

  • A deceased’s spouse or de-facto spouse
  • A child of the deceased (any age)
  • A person in an inter-dependency relationship with the deceased  (a close personal relationship between two people living together, where one or both provides financial, personal or domestic support to the other).
  • An estate where dependants listed above will benefit

Hopefully this article has assisted in helping understand the difference between Binding and Non-Binding beneficiary nominations and who a binding or non-binding beneficiary can be.

Chris Strano

Hi, I hope you enjoyed reading this article. If you want my team and I to help with your retirement planning, click here. If you prefer a DIY approach, then check out the SuperGuy HUB. Thanks for stopping by - Chris.

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  1. Mrs. Rita Wolfe

    I am in the process of filling out a non binding form for my 3 sons, so is the best way to go so that they are the only ones that can receive my super payout at the time of my death?

    • Chris Strano

      Hi Rita,
      A non-binding nomination provides the superannuation Trustee with direction as to how you would like your superannuation distributed upon your death. However, a non-binding nomination is not binding on the Trustee – they retain ultimate discretion on how death benefits are paid based on your relationships at the time of your death.
      A binding nomination on the other hand IS binding on the Trustee and the Trustee cannot use their discretion when distributing superannuation death benefits.
      Some superannuation funds do not offer binding nominations.

  2. Adam Burgin

    Hi Chris, I’ve been sent a superannuation beneficiaries form to complete and I’ve read on a few other sites about binding and non binding but I really don’t understand the jargon. Can you please explain in simple terms that I can understand?

    • Chris Strano

      Hi Adam, non-binding means that you are telling your super fund who your would to be the beneficiary of your super/pension when you die (like a wish list). The trustee will look at who you have nominated, but may pay your benefit to someone else if your relationship/s have changed since the date that you submitted the non-binding nomination. A binding nomination means that the super fund must pay your remaining super/pension balance to whoever is nominated on your binding nominations, regardless of any changes in relationships that occured since when you made the nomination and died. A binding nomination may need to be updated every 3 years. Binding and non-binding nominations are both susceptible to challenges.

  3. Karen Butler

    Hi Chris so if i nominate my executor as the beneficiary does the payout then go to my estate to be distributed as per the terms of my will?

  4. Jill

    I am a single person. No dependants at all. In no relationship. How do i leave my super to a friend ?

    • Chris Strano

      Hi Jill, I believe you would nominate your estate as the beneficiary and then make sure your Will is up to date

  5. Roger

    Hi Chris,
    We are a couple with an SMSF, which is set up currently with a non-binding death benefit nomination. We are the only trustees and members of this SMSF. Evidently if one of us passes away, that person’s remaining super in this SMSF will automatically go to the other member/trustee.
    But what happens if both of us happen to pass away? Will all of the remaining super in the SMSF go to our estate if we just have the non-binding nomination in place? Or do we need a binding nomination to ensure this happens?

    • Chris Strano

      Hi Roger,
      Great question. In general, if there is no effective death benefit nomination in place, the trustee/legal personal representative will decide who receives a member’s death benefit based on the deceased’s relationships at the time of death. In such instances it is common for the balance to simply be paid to the estate and distributed via the Will.
      If you both were to pass away and it is able to be determined who died first, then the balance will be transferred to the last surviving member, then distributed in accordance with their nominations or to their estate as they would now hold the total balance.
      If it is unable to be determined who died first, it is assumed the oldest person died first and the older person’s balance is transferred to the youngest, then distributed in accordance with the younger person’s nominations or to their estate, as they would now hold the total balance.
      This should be confirmed with your solicitor and the Trust Deed of your SMSF. It is a very important consideration, espeically if blended families are involved, as you can see the potential risks.

  6. John Michael Stephens

    Hello Chris,

    My son David is 41 and has had employer super for many years without ever including a death benefit nomination until now . He has received forms to fill in and is unsure whom to nominate, He currently has no dependants, but has a brother and sister in the same age bracket. Further to his problem he has not prepared a will. What happens if he passes away and who benefits from his estate?

    • Chris Strano

      Hi John,
      A superannuation balance is only able to be paid to a person defined as a dependant under superannuation law, as defined here. Alternatively, a person can usually nominate their Estate as the beneficiary in which case the proceeds will be paid to the estate upon death and distributed in accordance with the Will.
      If he were to pass away with no superannuation nomination, the super fund has discretion as to who it is paid to (based on eligible dependants), or may simply pay the balance (and any life insurance) to his estate. If he has no Will, he will be said to have died ‘intestate’. How his estate is treated may be based on the law of the state in which he dies/resides.. this is outside my knowledge. It sounds like he should consider seeking legal advice as soon as possible.

  7. Margaret Wilkinson

    My friend’ s wife recently died. He is the sole beneficiary of her will and non-binding beneficiary of her super which was paying her an allocated pension. He would like to transfer her super money into his super fund, but her super fund is insisting that they will only pay the fund balance by cheque paid directly to him. He is 77, and does not meet the work criteria for contributing to a super fund. Is their any way he can have the money treated as a transfer into his fund so he can avoid the hassle of investing the money directly. He currently recieves an allocated pension from his super and a part aged pension.

    • Chris Strano

      Hi Margaret,
      Unfortunately money cannot be transferred directly from one member’s account to another member’s account. However, some super funds allow the death benefit to be taken as an income stream instead of, or in addition to, a lump sum. This can allow the pension balance to remain in pension phase, rather than being paid out, provided the super fund in question allows this. Otherwise, it would need to be paid out as a lump sum to his personal bank account. Being over age 74, he is unable to contribute this amount into super even if he did meet the work test.

  8. cherie

    Hi Chris,

    My husband died recently from brain cancer and I am the sole beneficiary of his will and non-binding beneficiary of his super. The claim has been accepted however the trustee has come back with a proposal of a pension, I do not want a pension and I’m surprised I was not even given the option of lump sum why is this the case.

    • Chris Strano

      Hi Cherie,
      I am truly sorry for your loss.
      I’m not sure why you do not have the option of a lump sum payment. Standard super rules generally permit a death benefit to be paid to a spouse as a lump sum OR a pension (or a combination of both). However, if the super fund’s specific rules state that death benefit must be paid as a pension, then it may be your only option. I’m not sure of your age (or how old your husband was), but you may have the option of withdrawing the full balance as a pension payment immediately (be mindful of any tax that would be payable).
      Some people actually prefer to take death benefits as a pension because all earnings from the investments supporting the pension are tax free.
      You may consider seeking professional advice, especially if the superannuation death benefit is of significant value.


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