Extension of 50% minimum pension draw down relief from 1 July 2009
The Government will halve the minimum payment amounts for account-based pensions for 2009-2010. Reducing the minimum payment amounts for account-based pensions will assist pension account balances to recover from capital losses from the global recession.
This measure extends the pension drawdown relief provided by the Government for 2008-2009.
The minimum annual income payment for an account-based pension is calculated as a minimum percentage of the account balance as follows:
|
Age
|
Minimum annual
payment
|
Minimum annual payment
for 2008-2009 as per
Regulations (announced 18
February 2009)*
|
Minimum annual
payment for 2009-
2010 as per
Government
announcement
|
|
Under 65
|
4%
|
2%
|
2%
|
|
65-74
|
5%
|
2.5%
|
2.5%
|
|
75-79
|
6%
|
3%
|
3%
|
|
80-84
|
7%
|
3.5%
|
3.5%
|
|
85-89
|
9%
|
4.5%
|
4.5%
|
|
90-94
|
11%
|
5.5%
|
5.5%
|
|
95 and more
|
14%
|
7%
|
7%
|
*Note that where a pensioner has already received in excess of the reduced minimum, the minimum in their case will be the amount they have actually received. No refund will be allowed.
Note: These limits are based on the pensioner’s age at the commencement of the pension and at the start of each subsequent financial year.
Oculus comment
A client commencing an account-based pension from 1 July 2009 can defer an annual pension payment (equal to 50% of the legislated minimum) to 30 June 2010. Their next pension payment is not required to be drawn until 30 June 2011. This enables the client to maximise their tax-free earnings in their pension by limiting and deferring pension payments where possible.
Note that if a client commences an account-based pension part-way through 2009- 2010, they will need to draw down 50% of the pro-rated minimum amount by 30 June 2010.
If a client wishes to fully commute their pension in 2009-2010, they will still need to draw down 50% of the pro-rated minimum amount of the pension prior to commutation. In addition, if the commuted amount is rolled over to a new pension, the client will need to draw down 50% of the pro-rated minimum in the new pension.
Pension product providers will need to clarify whether a client who has already elected to draw the current 50% minimum pension in 2008-2009 will automatically have the 50% reduction in the minimum pension drawdown applied to their account in 2009-2010 or whether they will need to elect again that the reduced minimum applies.
