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Pension minimum drawdowns reduced by 50 per cent

The Government is temporarily reducing super drawdown requirements for pensions by 50 per cent for the income years 2019/20 and 2020/21 due to the economic impact of COVID-19. This measure was implemented to support retirees in managing the impact of the recent volatility in financial markets and the impact of the prevailing low interest rates on their retirement savings.

 

Amendments will be made to the Superannuation Industry (Supervision) Regulations (SISR) 1994 to give effect the reduction in the minimum payment amounts for the two years.

The comparison between the current super drawdown rates and the new rates are as follows:

 

Member ageDefault min drawdown ratesReduced drawdown rates for 2019/20 and 2020/21
<654%2%
65-745%2.5%
75-796%3%
80-847%3.5%
85-899%4.5%
90-9411%5.5%
=>9514%7%

It must be noted that this measure does not disadvantage members whose super account does not meet the requirements of SISR 1994 to pay a super income stream in that income year. In this case, the member will not receive a super income stream payment, even though the member remains entitled to receive a payment. The new measures do not change anything in these circumstances.

Also, if the capital supporting the super income stream has been reduced to nil, the member’s right to a super income stream will have been exhausted, and the new measures do not apply to the account.

In the event the member has already received income payments which have exceeded the new reduced minimum payment amounts for the income year, the member can elect not to receive any further payments from the super account. Bear in mind that the member cannot return or put back any difference above the new minimum payments, unless permitted under general contribution rules.

The amendments are designed to assist pension account balances to recover from capital losses associated with the impact of COVID-19 on the financial markets. By reducing the super drawdown requirements, it reduces the need to sell assets at a loss in order to satisfy the minimum payment requirement.

You should contact your superannuation provider or accountant in order to start reducing the income payments.