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Reduction in minimum pension popular

Minimum pension reduction

A significant majority of retirees are taking advantage of the minimum pension reduction originally introduced for the 2020 income year.

A poll of financial advisers and accountants has shown the financial relief measure creating a minimum pension reduction of 50 per cent for the 2020, 2021 and 2022 financial years, and now extended to include the 2023 income year, has resonated well among retirees.

The survey, conducted during an Accurium Quarterly SMSF Update webinar held recently, showed 74 per cent of the attendees indicated their clients have reduced the amount they are drawing down from their income streams as a result of the relief measure.

A further 18 per cent of practitioners revealed their clients had taken advantage of the measure but had not actually reduced the amount they are drawing down from their pensions. Instead, they have treated any income stream payment amounts above the required minimum pension as a partial commutation to enjoy a transfer balance cap benefit.

Finally, only 8 per cent of participants said their clients had continued to draw the same level of pension as before the measure was introduced.

“It’s different to what I expected that 74 per cent have actually taken advantage of the 50 per cent reduction [in the minimum pension] and they’ve actually withdrawn a lesser amount,” Accurium head of education Mark Ellem said.

Accurium SMSF manager Matthew Richardson noted it was an indication of how welcome and necessary the measure was.

“It shows us that people are needing that extra amount to have their lifestyle continue as they want it to,” Richardson said.

According to Ellem, it may be an indication many retirees are taking a cautious approach to the other disruptive factors they have been forced to face over the past few years.

“[It could be] they’re taking advantage of the fact that there just might be some market volatility [affecting] the fund and [acknowledging] the purpose of the 50 per cent reduction was to [prevent SMSFs from] being forced into selling assets in order to pay the minimum pension,” he noted.

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