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What do you need to do?Consider the impact of the relief on your business and the potential need to alter administration systems and disclose the nature of relief to your pension members and annuitants.
John Edstein
Partner
T +61 2 9296 2129
Michelle Levy
Partner
T +61 2 9296 2437
Sydney
Today the Treasurer and the Minister for Superannuation and Corporate Law issued a joint press release announcing relief from the requirements for minimum drawdown amounts for certain pensions and annuities.
At present, the rules for account-based pensions and annuities specify minimum payment standards with the minimum payment calculated according to a formula in the legislation. In summary, the minimum payments are determined by reference to age and the value of the member’s account balance as at 1 July each year.
For pensions or annuities which commenced on or before 1 July 2008, minimum payments for 2008-09 must be based on account balances as at 1 July 2008. For most pensioners and annuitants, the current downturn in global financial markets has likely had a significant adverse impact on their pension and annuity account balances since 1 July 2008. The Government has announced temporary relief in response to these issues.
The precise detail and form of the relief has yet to be released. Treasury has indicated that amending regulations may be introduced. The joint press release states that “the Government will suspend the minimum drawdown requirement for account-based pensions for the second half of 2008-09”. The press release further states that “this will occur through a 50 per cent reduction in the minimum payment amount for 2008-09. … For those people who have already taken half of the current minimum payment for 2008-09, the annual nature of the minimum payment rules means that a further payment will not be required until the end of the 2009-10 year.”
The Government has stated that the temporary relief will apply to:
- account-based annuities and pensions (payable since 1 July 2007)
- allocated annuities and pensions (in place prior to 1 July 2007)
- account-based and allocated pensions payable from Retirement Savings Accounts, and
- market-linked (term allocated) annuities and pensions.
It would be prudent for providers of pensions products and annuities to consider the implications of the relief in terms of:
- their administration systems
- internal policies and procedures for pension and annuity payments, and
- the content, timing and means of disclosure about the relief, both to existing pensioners and annuitants, and to prospective pensioners and annuitants.