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Reduction in Minimum Payments for account - based pensions.


Regulations to temporarily halve the minimum payment amounts for account-based pensions for the 2008-09 financial year have been released.


The regulations reduce the minimum payment amounts for account-based, allocated and market-linked (term allocated) pensions by 50%. For example, a
self-funded retiree who is 60 years of age is currently required to draw a
minimum annual pension payment of 4% of their account balance as at 1 July of
that year (or the account balance as at the commencement date of the pension,
if it commenced during that year). Under the amended regulations, this
percentage would be reduced to 2%.


This temporary relief addresses concerns that the minimum drawdown requirement for this financial year was based on account balances at 1 July 2008, when equity values were
higher. It also responds to concerns that meeting the minimum drawdown amount
in 2008-09 will mean having to sell investment assets and realise losses in a
depressed market.


For those people who have already taken half of the current minimum payment for 2008-09, the annual nature of the minimum payment rules means that no
further payments will need to be made until the end of the 2009-10 year.


The minimum annual payment rule, which varies depending on age, is designed so retirees draw down on their superannuation capital over their retirement.
This rule recognises that superannuation is designed as a retirement savings
vehicle with substantial tax concessions.


The regulations can be found on the Federal Register of Legislative Instruments website at www.comlaw.gov.au