News

Superannuation pension drawdown relief announced for 2008-09

Release date: February 2009

The Government announced on Wednesday the 18th of February, that it will temporarily suspend the minimum drawdown requirements for account-based annuities and pensions for the second half of 2008-09. Treasurer Wayne Swan and the Minister for Superannuation and Corporate Law, Senator Nick Sherry, said the measure responds to concerns that meeting the minimum draw down amount in 2008-09 would mean retirees having to sell investment assets and realise losses in a depressed market.

The suspension of the minimum draw down requirements will occur through a 50% reduction in the minimum payment amount for 2008-09. The temporary relief also addresses concerns that the minimum draw down requirement was set based on asset values as at 1 July 2008, when equity values were far higher.

The temporary suspension of the minimum payment requirement will apply to clients with existing:

  • account-based annuities and pensions;
  • allocated annuities and pensions (pre-dating the Better Super changes);
  • account-based and allocated pensions payable from RSAs; and
  • market-linked (term allocated) annuities and pensions.

All pensions commenced from 1 July 2008 will also be entitled to the reduction on the pro-rata pension amount
Currently, it is a requirement that minimum payments be made from a superannuation account-based pension at least annually.

For those clients who have already taken half of the current minimum payment for 2008-09, the annual nature of the minimum payment rules means that a further payment will not be required until the end of the 2009-10 year.
It is important to note that temporary suspension of the minimum drawdown requirements for the second half of 2008-09 is voluntary and does not extend to clients with defined benefit pension i.e fixed-term and lifetime pensions.
Another consequence of the announcements is that it may allow people to meet the income limits for Centrelink purposes more easily.

The following table for account based pensions is based on our understanding of the announcement in the government’s media release.

Table of minimum percentage factors for account based pensions:

Age of Pensioner
Minimum percentage factor (%)
Revised Minimum percentage factor for 2008-09 financial year (%)

Under 65

4

2

65 to 74

5

2.5

75 to 79

6

3

80 to 84

7

3.5

85 to 89

9

4.5

90 to 94

11

5.5

95 or more

14

7

 

The Treasurer said the Government will continue to closely monitor market conditions and examine options for a longer term solution to this issue following the Australia's Future Tax System Review.

Source: Treasurer Wayne Swan and the Minister for Superannuation and Corporate Law, joint media release No 013, 18 February 2009

Should you have any questions regarding your pension please do not hesitate to contact your Adviser or David Lolicato on 8271 2711 or email david@evolutionsuper.com.au