What is an Allocated Pension?
An allocated pension is an investment account based pension that is rolled over from your superannuation account once you reach preservation age. It is created by using the savings you have accumulated in your existing superannuation funds via either employer contributed superannuation Guarantee contributions or personal (deductible or non-deductible) contributions. These superannuation savings are then rolled into an allocated pension and invested in the investment option you allocate, ranging from moderate investor to very aggressive investor.
Once you are entitled to commence a pension from your superannuation fund, the status of your super fund will switch from an accumulation account to an allocated pension. Pension payments from your super account continue to be paid until the account balance is exhausted. Payments may be comprised of both the original capital invested and the earnings on the earnings on that capital, minus administration fees and charges. An allocated pension allows a pension payment to be made on a monthly, quarterly, half yearly or annual basis.
Lump sum amounts may be withdrawn from the pension at any time. Any lump sum withdrawal is treated as a superannuation lump sum and reduce the account balance of the pension.
Who is entitled to it?
To be eligible to receive a pension from your superannuation fund. You must have satisfied a condition of release or have reached preservation age (55-60). Once you have reached preservation age, you may access your superannuation funds in the form of a pension. There is no limit on the amount that can be rolled over to commence your pension nor is there a work test.
How much money is needed to start?
To ensure pension payments are spread over the recipient’s life expectancy, a minimum pension payment must be paid each year. The minimum amount is calculated on the date the pension commences and on 1 July of each subsequent year. There is no maximum pension payment (unless you are setting up a transition to retirement pension, where the maximum amount is 10% each year.) Below illustrates the minimum amount you are able to withdraw each year.
|Minimum percentage factors|
|95 and over||14%|
How to start your allocated pension?
You can start receiving an allocated pension when you reach your preservation age and commence rollover of your super funds from accumulation account to an account based pension account. Before you decide to start a pension you should seek advice from a financial adviser to allow you to calculate how much you will need over your life expectancy as well as allow your adviser to consider a financial plan for you, in order to appoint the appropriate investment portfolio to your superannuation account. This is important, as appointing a tailored investment portfolio to your super account will allows your super funds to continue to grow while you are receiving a pension. When your superannuation account is in pension phase investment earnings on your super funds are tax free. This will allow your super funds to continue grow while you are receiving a pension.
Who can set it up?
If you’re age 55 or over and you feel you have enough capital to start a pension or would like to commence a transition to retirement pension to reduce your tax, a financial adviser can help you consider a pension strategy for your needs and have their team set it up for you. All you will have to do is identify your lifestyle needs and how much funds you will need to continue a comfortable lifestyle.
Where can I get more information?
IMPORTANT – The information on this website is general in nature and does not take into account your personal needs and objectives, you should not act upon any of this information without first seeking advice from a qualified professional.