Self Managed Super Pension Opportunity

There will never be a better time to start an account based pension in your superannuation fund

Currently the tax treatment for account based pensions is very favorable. Future changes may erode these advantages.

What is an account based pension?

An account-based pension (also known as an allocated pension) is a regular income stream, purchased with money you have accumulated in superannuation. The income stream commences after you have reached your preservation age of 55 for those born prior to 1st July 1960, ranging to age 60 for those born after 30th June 1964.

The process of starting an account based pension

It is an easy process within a Self Managed Super Fund (SMSF). Once you reach your preservation age, your accumulated balance is transferred into an account based pension account within your SMSF.  The existing assets remain in place and become the basis of your account-based pension

The rules require the withdrawal of the minimum amount each year. Depending on your age, the minimum starts at 4% of the fund balance, from age 55. If you have a transition to retirement pension your maximum pension is limited to 10% of the fund balance each year.

In the event of your death, the remaining balance in your account will be paid to your beneficiaries or your estate in accordance with your binding death nomination.

Features of account-based pensions

Your Superannuation Fund pays no tax on the earnings from the investments in the fund that support your pension

Prior to age 60 there may be a taxable portion in your account based pension payment, which will be taxed at your marginal tax rate less a 15% tax offset

When you reach age 60 the pension you receive is all tax free.

Once you meet a condition of release, such as retire from the workforce or reach age 65, you may withdraw some or all of the money as a lump sum, or increase your pension above the 10% limit.

Pension payments can be varied between the minimum and maximum limits.

Investment earnings are added to your account. If your pension is less than the earnings, your account balance will increase.

Earnings on the investments are dependent on the investments within the Superannuation Fund.

Investment choices are wide and varied depending on each Superannuation Fund.

Your account based pension ceases when the balance reaches nil or you pass away. There is no guarantee that your account based pension will outlast you. The duration of the pension depends on the beginning account balance, earnings generated and the amount of pension withdrawals.

Estate planning strategies can apply to superannuation pensions

Account based pensions may be reversionary, with the pension continuing to the surviving spouse, dependent children or disabled adult children.

Superannuation Fund Assets enjoy a level of asset protection from personal debt.

Account based pensions are tax effective income streams and there will never be a better time to set one up.

What next?

If you would like to find our more information to take advantage of this tax strategy, please contact us to discuss the suitability of an account based pension for you.

Phone 02 6021 0335

Or email:

Marian Adams -