The Federal Government has announced that reduced temporary minimum pension draw downs which were first introduced in the 2019/20 financial year as a response to the COVID-19 pandemic, have been extended for a further year.
Reduced pension minimums – the minimum sum that must be withdrawn from your pension each year – were due to end on 30 June 2021 however as a part of additional flexibility introduced in the recent Federal budget, they are now further extended until 30 June 2022.
The government temporarily halved minimum drawdowns in March 2020 in response to the COVID-19 outbreak. This was designed to assist self-funded pensioners retain more capital within their portfolios with expectations of related financial market weakness.
The following table outlines the standard and temporary minimum draw down requirements:
|Age||Minimum percentage of account prior to March 2020||Temporary reduced minimum percentage (FY20, FY21 & FY22)|
|65 – 74||5%||2.5%|
|75 – 79||6%||3%|
|80 – 84||7%||3.5%|
|85 – 89||9%||4.5%|
|90 – 94||11%||5.5%|
What will happen in the new financial year
Depending on the recommended pension provider, most Stonehouse clients who have previously elected to receive reduced minimum pension payments will automatically continue to have them set at the revised minimum percentage. In this case the new pension amounts will be recalculated as at 1 July 2021 and will continue at that rate, unless adjusted, until 20 June 2022.
For clients with Self-Managed Superannuation Funds (SMSFs) in particular however the new minimum pension draw down requirements will need to be reassessed to ensure that they continue to meet their obligations.
We would encourage all clients with SMSFs incorporating pension phase assets to discuss their draw down requirements with their Financial Adviser and for any other client who may wish to revise their pension payments as a result of this continuing flexibility.
Benjamin Hancock – Director