The Government has released the final report of the retirement income streams review, which recommends no changes to the minimum pension drawdowns.
A review of retirement income streams was a 2013 election promise, with a discussion paper released in July 2014. The final report comes only days from the likely start of the next election campaign.
“This delivers on our commitments to review the minimum drawdown rules for account-based pensions and regulatory barriers to the development of appropriate income stream products in the Australian market,” said Minister for Small Business and Assistant Treasurer Kelly O’Dwyer.
“The Government has accepted the Review’s recommendations.”
The final report of the review says that “the current annual minimum drawdown requirements are consistent with the objective of the superannuation system to provide income in retirement and should be maintained”.
However it also recommends that the Australian Government Actuary be asked to undertake a review of the minimum pension drawdowns every five years and “advise the Government to ensure that they remain appropriate in light of any increases in life expectancy”.
“Any other changes to the minimum drawdown amounts should only be considered in the event of significant economic shocks and based on further advice from the Australian Government Actuary.”
The discussion paper had raised a number of options in light of the changes to minimum pension drawdowns during and after the GFC. These included a possible “automatic mechanism for adjusting the minimum drawdown amounts in response to significant adverse investment market performance”.
The report also makes recommendations around encouraging the development of annuity-style retirement income stream products.
“An additional set of income stream rules should be developed which would allow lifetime products to qualify for the earnings tax exemption provided they meet a declining capital access schedule.”
“The alternative product rules should be designed to accommodate purchase via multiple premiums but additions to existing income stream products should continue to be prohibited.”
The report recommends SMSFs and small APRA funds be prohibited from offering these products.