Self-funded retirees have called for an “immediate” change to the current superannuation pension drawdown levels.
This is one of the recommendations of the Association of Independent Retirees (A.I.R), which represents partially and fully self-funded retirees, in their 2018/19 pre-Budget submission.
“A.I.R. strongly recommends that there needs to be a clear recognition that the superannuation retirement income stream pension phase is very different from the pre-retirement accumulation phase.”
“In the retirement phase we now have an increasing length of time being spent in retirement and more than ever there is a need for a prudent investment profile to deliver a regular cash flow to provide a self-funded pension over the whole of any retiree’s lifetime.”
“This increased longevity in retirement becomes a serious issue as assets are depleted and the regulated annual drawdown percentage from the fund increases for those relying on their assets to provide a continuation of their lifestyle with an adequate regular monthly income stream.”
A.I.R is calling for a lowering in the minimum draw down levels for people aged over 75.
|Current Age of pension|
|Proposed age ranges||Proposed minimum|
|65 to 74|
65 to 79
|75 to 79|
80 to 90
|80 to 84|
90 to 95
|85 to 89|
95 and over
|90 to 94|
|95 and over|
Following an election promise the Government reviewed the pension drawdown levels, but did not make changes. There was concern that lowering the minimum drawdowns would make it easier to use superannuation to accumulate wealth in a favourably taxed environment. But A.I.R says this issue has been overcome by the Transfer Balance Cap.
A.I.R claims that changing the drawdown levels would have “no cost impact to the Government and, in fact, will be revenue positive as it is estimated that implementing this change will generate as much as $200 million additional savings for the Government by maintaining assets and deferring for some the drawing down on the part Age Pension”.
“Implementing this recommendation would, importantly, provide far greater flexibility in the actual drawdown for many retirees.”
“The Government needs to engage in this type of genuine reform of the superannuation system to make it more efficient and effective in terms of assisting more Australians to achieve self-sustainable financial independence in retirement.”
“Agreeing to and making this change will help redress some the hurt, disillusion and distrust from the Government’s superannuation reforms in 2016 currently felt by many who are now, or are intending to, self-fund their retirement. This would assist the Government in rebuilding some credibility and confidence in the superannuation system for those Australians who are self-funding their retirement and those planning their retirement.”