Gary Lucas Financial Advice | No. 1 Certified Financial Planner in Byron Bay
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Financial Insights

 

ADVICE TO NAVIGATE THE COMPLEX WORLD OF FINANCE & BUSINESS

Payments From Superannuation Pensions

 
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You can provide yourself with a number of benefits by moving your accumulated superannuation to a pension account.

Assuming that you have reached your “preservation age” and that you are retired, or over age sixty-five, you should have full access to the account balance in your super fund. If you are over age sixty, all withdrawals from superannuation, whether in accumulation or pension phase, are tax free including regular pension payments. This is a real positive.

Another advantage is that the investment earnings you make within your pension account are all tax free, as opposed to the earnings from accumulated super funds which get taxed up to 15%.

How much do you have to withdraw from your account-based pension each year?

Once you are in pension phase, you must withdraw a minimum amount that is subject to a government formula. At 1st July each year, your annual “minimum amount” gets re-calculated by multiplying the account balance by a percentage based on your age, as listed below.

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How often are income payments made?

Whilst the amount mentioned above is stated in annual terms as a lump figure, income payments can usually be made monthly, quarterly, half-yearly, or yearly. The most common choice is to receive monthly payments, which makes a lot of sense considering that this pension income is specifically designed to replace your salary and to meet your regular expenses.

What if the minimum pension is more than you need?

This is a common issue, but it is rarely a problem. There’s no law that states that you have to spend all the money before you get the next payment. You are free to spend it as you choose, and to keep any excess to build up a cash reserve or save for a larger capital item. Alternatively, there are also many options for it to be invested elsewhere.

Can you withdraw a lump sum from your account-based pension?

Yes. The pension account is flexible. This means that you can draw a base pension amount to cover your regular living costs and then withdraw lump sums when you need them to meet the cost of larger items that require funds, like home improvements, unexpected medical costs, car upgrades, and more exciting holidays.

Compared to the restrictions of an accumulated super fund, there’s a lot more freedom to be had with funds held in a pension account.