Despite recent comments by other senior members of the Government, changes may still be made to the minimum superannuation pension drawdown amounts, according to the Assistant Treasurer Josh Frydenberg. The Government will also take superannuation changes resulting from the Tax White Paper process to the next election,
Speaking to the Committee for Sustainable Retirement Incomes (CSRI) the Assistant Treasurer said “the Government will of course consider good ideas put forward as part of the Tax White Paper process and any changes recommended by that process will be taken to the Australian people at the next election.”
This follows comments by the Prime Minister that there would be no changes to superannuation in this term of Government and there were no plans to make changes in the future.
The Social Services Minister Scott Morrison was also recently reported to have said there would not be changes to superannuation pension drawdown amounts.
Mr Frydenberg said “in response to an election commitment, the Government has been reviewing the current minimum drawdown rules for account-based pensions and the rules that may be impeding the development of other retirement income products.”
“I am hopeful of making an announcement on this in the not too distant future.”
Though he did say, “to be clear, we are not considering increasing the current rates, but rather making sure the system allows for innovative retirement products to be developed.”
“While account‑based pensions have many benefits, particularly flexibility to access the capital in the account at any time, the downside is that more of the investment and longevity risk is left with the retiree, than in the case of lifetime annuities for example.”
This can result in retirees being too conservative when deciding how much to draw down on their superannuation pension, which “can lead to retirees living frugally and settling for a lower living standard in retirement.”
Mr Frydenberg said the Treasury consultation process has been looking at products which don’t pay an “immediate or regular pension.” This could include having a ‘capital depletion rule’ in addition to the current ‘minimum withdrawal rule’.
The Financial System Inquiry had recommended a ‘Comprehensive Income Product for Retirement’ (CIPR), a recommendation Mr Frydenberg says the Government is considering, along with the other recommendations.
“If we do agree to go down this path, implementation would need to proceed on a measured timeframe.”
Mr Frydenberg also said the Government would have “more to say” about superannuation fund governance later in the year.
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