What is an allocated pension?

(New rules effective 1 July 2007)

From 1 July 2007, new rules apply in regards to income draw downs when commencing an allocated pension. A single set of draw down rules will apply according to government legislation as indicated in the following table. Note that the minimum draw down percentage increases over time. No maximum limits apply, hence you can draw down the full account balance if you so wish (except for transition to retirement allocated pensions – see below).

You are able to change your income to suit your needs (as long as it meets the minimum legislated requirements).

You can maintain control of the assets within your fund by selecting your own investment strategy in line with your attitude to investment risk. 

• The ability to invest the gross amount of your super without any lump sum tax implications;

• No tax is payable on the investment earnings within the fund, enabling you to achieve tax-free growth on the amount invested;

• For those aged between 55 - 59 years of age, favourable taxation treatment of income from the fund applies, which can include a 15% tax rebate on part of the income;

• Tax free income and lump sum withdrawals for those aged 60 years plus.

The ability to vary the level of income above the minimum annual pension requirements adds flexibility to your income options and allows you to make adjustments to your income should your income requirements change. The capital remains under your control because you have the ability to withdraw lump sums ( except for transition to retirement allocated pensions - see below).

• Eventually, the account balance can be exhausted and in this case your income payments would cease;
• Investment returns on your capital will depend on the investment option selected, market conditions and fund manager performance. This will have a major bearing on how long capital will last.
• Allocated pensions cannot be purchased with ordinary (non-ETP) money. This means that you need to have existing superannuation funds or be able to make a contribution to superannuation prior to purchasing the allocated pension.

TRANSITION TO RETIREMENT ALLOCATED PENSIONS

You will have the option of accessing your superannuation before you retire via a transition to retirement allocated pension. Taking such a pension enables an individual who has reached 55 years of age (the current preservation age) or over to access their superannuation benefits as a non-commutable allocated pension while continuing to work.

Non-commutable income streams are somewhat restrictive and have characteristics that you must comply with. You must continue to take an annual pension income (the amount of which is set by government legislation) and you cannot take out additional lump sums from this pension until you meet a superannuation condition of release such as being permanently retired or reaching 65 years of age.

Any transition to retirement non-commutable allocated pension commenced on or after 1 July 2007 will be subject to new minimum and maximum pension standards.

The minimum pension standards will be the same as the ordinary allocated pension standards tabled above. However the maximum pension standard will be set at 10% of the account balance per year.