Q&A: Can I combine multiple pension accounts?

Number one, you are 100% correct. You can only ever have one accumulation account in each super fund. Now, you could have more than one super fund creating the ability to hold multiple accumulation accounts. An example, I have a self-managed super fund and I also have an industry fund. I hold my insurance benefits through my industry fund because I find it more cost-effective to do that. I’ve got two funds. My SMSF has an accumulation account and my industry fund has an accumulation account. But the restriction I’m looking at here is you can only ever have one accumulation account per fund. You can, again, as you’ve mentioned, have multiple pension accounts or multiple pension interests in the same super fund, which is what you’ve ended up here, and you now want to combine them.

Now, in most all cases, in fact, in almost every case, you can’t add further capital or further amounts to an existing pension. If you’ve got Pension One with $1 million dollars and Pension Two with $1 million dollars, if you put the $1 million from Pension 2 into Pension 1, you’ve added to the value of it. You’ve added to the capital value of that pension, which you’re not allowed to do. What would usually be required is for you to cease those different pension accounts. You would take that money essentially back to accumulation phase, and then you’d start a new larger pension with the combined balances or part thereof of those combined balances.

Now, in your particular case, because it’s UniSuper, they may have their own specific requirements. They may have their own specific processes that need to be used. I would suggest contacting them and seeing how they can assist you personally with that and what mechanisms or processes could be used to achieve the desired outcome you’re looking for around combining those accounts.

What’s interesting is that I jumped on the UniSuper website and it says that once you start a Flexi pension, you can’t add money to it. If you want to transfer extra funds to your super, do that before you apply. That’s word for word from the UniSuper website. Again, to me, it suggests the same process I mentioned before about stopping or commuting the existing pensions, going back to accumulation, and then recommencing a new pension.

Now, let me add, if I can, some further comments here which are relevant to you here around, I suppose, the particular question that you have, but also relevant for all types of funds, including self-managed funds. If you’re considering combining multiple pension accounts, you would need to stop them and take those benefits back to accumulation phase. What the result of that is, is you’ll have one accumulation account. So all the taxable components of all those different pensions get mixed together. All the tax-free components get mixed together. So you then only have that one accumulation account with taxable and tax-free components. Now, it might have been over the years that you’ve put in place estate planning or tax planning to keep those tax components separate for tax planning purposes or estate planning purposes. If you combine the pensions, that could unwind all those years of work, again, because you can only ever have that one accumulation account. When you roll those pensions back, they do get blended.

Second of all, make sure that you pay at least the minimum pro-rated pension before you stop any of them. Then once you recommence the new pension, make sure you pay the minimum on that pension. Otherwise, you’ll miss out on the tax exemption on the earnings. Let’s just say that you have three pensions and today, 14th of December, I decided to stop them. Make sure that the pro-rata payments from 1 July 2023 to today, the 14th of December, you pay each of those pensions before stopping them. Otherwise, the fund won’t get those tax-free earnings because you didn’t pay the minimum pension.

When you then recommenced your new one larger pension today on the 14th of December, make sure that you pay your pro-rate minimum before 30th June next year. Again, just to ensure you get your tax-free earnings.

The final point on this one is that if you cease those existing pensions, whether it be UniSuper, whether it be an SMSF or whatever, and then you start a new pension, think about your estate planning outcomes. Do you now need to put a new reversionary nomination on that pension? Do you now need to put a new death benefit nomination on any of your accounts? Because you have now changed those accounts that exist in the fund. Look, probably not doable unless you do the commutation, the ceasing back to accumulation and then recommencing. But I do highly recommend you contact UniSuper and ask them what their processes are that may be required.