Extension of Drawdown Relief for superannuation pensions

Senator The Hon Nick Sherry, Assistant Treasurer and The Hon Chris Bowen MP, Minister for Financial Services, Superannuation and Corporate Law and Minister for Human Services announced today that the Government would be extending the drawdown relief in relation to the minimum annual pension payment requirements for account-based, allocated and term allocated pensions for 2010/2011. The relief is subject to the necessary changes being made to regulations which the Government has stated will occur as soon as possible in the new financial year.

What does this proposed change mean?

As we are yet to receive the regulations outlining the proposed changes, we will be implementing these based on last year's drawdown relief. This proposed change means that the minimum annual pension requirement for 2010/2011 would be reduced by 50 percent.

Table A: Minimum payment factors

The proposed change means that existing account based pension clients will have their minimum annual required payment in 2010/11 calculated by multiplying the 'new' relevant factor by the pension's account balance on 1 July 2010.  

Age of Beneficiary              Percentage factor              New Percentage factor  

Under age 65                         4%                                        2%

65 - 74                                   5%                                        2.5%

75 - 79                                   6%                                        3%

80 - 84                                   7%                                        3.5%

85 - 89                                   9%                                        4.5%

90 - 94                                  11%                                       5.5%

95 or more                            14%                                       7%

As always the amount of pension drawn should be closely correlated with the investment strategy of the superannuation fund.

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