Temporary reduction in superannuation minimum drawdowns
The Morrison Government has recently announced an extension of the temporary reduction in superannuation drawdown rates for a further year, until 30 June 2022. This measure will benefit retirees with account-based pensions and similar products by reducing the need to sell investment assets to fund minimum drawdown requirements.
|Age||Default minimum drawdown rates (%)||Reduced rates by 50 per cent for the 2021-22 income year (%)|
|95 or more||14||7|
From 1 July 2020 onwards, Bendigo SmartStart Pension members who were on the previous (default) minimum rate have automatically reduced to the new temporary minimum unless you let Sandhurst Trustees know otherwise. As part of the annual review process, all pension members will receive a review pack in July which includes a reminder that the Government has extended the minimum drawn amounts to the 2021/22 financial year.
New pension applications requesting the minimum from now will receive the new temporary minimum up to the end of the period of this reduction, which is currently 30 June 2022.
The reduced rates will apply until 30 June 2022. However, the Australian Government may choose to extend the period. If there are any changes, we will let our members know via our website.
The government has also advised changes to social security deeming rates. As of 1 May 2020, the upper deeming rate will be 2.25 per cent and the lower deeming rate will be 0.25 per cent. The reductions reflect the low interest rate environment and the impact on the income from savings.
Information may be subject to change, please refer to www.treasury.gov.au/coronavirus/households for information updates.
Mike is a 66 years old retiree with a superannuation account-based pension.
The value of Mike's account-based pension at 1 July 2019 was $200,000. Under the 2018-19 income year minimum drawdown requirements, Mike was required by legislation to drawdown 5 per cent of his account balance over the course of the 2019-20 and 2020-21 income years.
This means Mike had to drawdown $10,000 by 30 June 2020 and 2021 to comply with the minimum drawdown requirements.
Following the temporary reduction in minimum drawdown requirements, Mike can reduce his drawdown to 2.5 per cent of his account balance, that is $5,000 (if it meets Mike's cash flow needs) for 2019-20 and 2020-21 income years. If Mike has already withdrawn over $5,000 for 2019-20 and 2020-21, he is not able to put the amount above $5,000 back into his superannuation account.
As a result of this change to minimum drawdown requirements, Mike is able to preserve his capital while still drawing an income from his superannuation.
Important information about your Income Protection cover within your super
Events such as the bushfires, drought and of course, COVID-19, have had a big impact on us all.
With many changes to our everyday lives, it is important to know how these impacts could affect you and the protection your insurance cover offers.
Income Protection cover is taken to provide a replacement income if you become ill or sustain an injury preventing you from working and earning an income. If you become ill or injured and you are unable to work and earn an income, you will be able to claim Income Protection benefits subject to any terms or conditions set out in your Policy. Income Protection, however, does not cover workplace closures, times of quarantine and where there is no sickness or injury.
If you are still working 15 hours or more a week, your Income Protection cover will still be active. If your employment has dropped below 15 hours per week, you may no longer qualify for cover. If you are no longer working at least 15 hours per week or if your salary has reduced, please contact our Client Services Team on 1800 033 426. Alternatively, you can log into our secure member portal for details of cover you may have within your super.
If you haven't previously registered for our online portal, you will need your member number to get started. Visit bendigosuper.com.au/login to register now.
Prepared as at 12 January 2021 by Sandhurst Trustees Limited ABN 16 004 030 737 AFSL 237906, a subsidiary of the Bendigo and Adelaide Bank Limited ABN 11 068 049 178 AFSL 237879 (the Bank). The information contains general information only, it does not constitute any recommendation or advice. It has been prepared without taking into account your personal objectives, financial situation or needs and you should consider its appropriateness before acting on it. You should seek advice from a professional financial planner before making any financial decisions. Past performance is not a reliable indicator of future performance and you should consider other factors before choosing a fund or changing your investments. You Investments in these products are not deposits with, guaranteed by, or liabilities of the Bendigo and Adelaide Bank.