The reduced minimum pension relief that will now apply for the 2022 financial year is not restricted to account-based pensions, said a legal specialist.
A legal specialist has reminded the SMSF sector the extension of the COVID-19 minimum pension relief applies to all income streams and is not the sole domain of account-based pensions.
In May, the federal government announced the minimum pension would continue to be half the conventional rate for the 2022 income year, even though this was originally a coronavirus financial relief measure set to expire at 30 June this year. For individuals aged 64 or under, it means the minimum pension for the coming financial year will be 2 per cent and not 4 per cent.
Super Central self-managed superannuation executive consultant Michael Hallinan confirmed these rules will apply to transition-to-retirement income streams, as well as market-linked pensions.
“Consequently for the 2021/22 financial year, the minimum payment from your transition-to-retirement pension will be 2 per cent rather than 4 per cent,” Hallinan said.
Hallinan did, however, point out the maximum amount an individual can draw down for 2021/22 will stay at 10 per cent of the transition-to-retirement pension account balance at 1 July 2021.
He also noted the relief would apply to market-linked pensions, also referred to as term-allocated pensions, even though the required drawdown amounts for these income streams are calculated in a different manner using upper and lower limits.
“The lower and upper limits are calculated, respectively, as 90 per cent and 110 per cent of a calculated amount for the financial year. The calculated amount is the pension account balance (as at 1 July 2021) divided by a prescribed factor, which is related to the remaining term of the pension,” he said.
“As the minimum drawdown relief also applies to market-linked pensions, the lower limit for the 2021/22 financial year will be 45 per cent of the calculated amount rather than 90 per cent.”
Darin Tyson-Chan
June 30, 2021
smsmagazine.com.au