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Pensions

Permanent minimum pension reduction pursued

minimum pension AIR

A call has been made by the Association of Independent Retirees to permanently reduce the minimum pension and simplify the system’s age bands.

The Association of Independent Retirees (AIR) has called on the federal government to permanently reduce minimum pension requirements and cut down the number of age ranges applying to the measure.

“The Association of Independent Retirees recommends the minimum drawdown percentages from superannuation should be permanently lowered and the age ranges broadened for retirees aged 75 years and older,” AIR president Wayne Strandquist said.

Strandquist cited the improved longevity of Australians and the lack of flexibility shown in the nation’s pension framework as reasons why this move should be implemented.

“Retirees are now living longer than when the superannuation drawdown rules were established. At least 50 per cent of retirees at age 65 will live longer than the average life expectancy of 20 years and many could expect to live more than 30 years,” he noted.

“Life expectancy at age 75 is also steadily increasing and retirees need to ensure they can fund living expenses and out-of-pocket health and aged-care expenses in later life.”

There are currently seven age bands each with a different applicable minimum pension requirement, with individuals under 65 being the lowest, requiring a compulsory drawdown of 4 per cent, and people 95 and over being the highest, requiring a minimum drawdown of 14 per cent.

The AIR is proposing there be only five demographic bands in the system, being under age 65, ages 65 to 79, ages 80 to 90, ages 90 to 95 and ages 95 and over. With regard to these bands, the association has recommended the relevant minimum pension payments be 4 per cent, 5 per cent, 6 per cent, 7 per cent and 10 per cent respectively.

In March, the AIR lobbied the government to extend the 50 per cent reduction in the minimum pension that applied for the past three income years to the 2022 financial year as well.

The 2022 budget confirmed the relief will apply to the coming fiscal year.

“This temporary relief until June 2023 provides retirees with the flexibility they need to manage their superannuation during periods of investment market volatility, heightened military tension and ongoing COVID-19 disruptions,” Strandquist noted.

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