At the height of the COVID-19 pandemic, the government announced some changes which included reductions in the minimum pension drawdown rates. This change was welcome news for retirees with account-based pension and transition to retirement pensions.
The upshot is that eligible retirees with enough cash flow to ride out this period of extreme market volatility would not be forced to sell shares, property or other assets into a falling market simply to comply with the usual minimum drawdown amounts. This allowed retirees to preserve more of their capital, and as a result, they will have more money working for them when the market recovers (and recover it has!)
The change was introduced in the 19/20 financial year and is ending on the 30th June 2021. If you have taken advantage of the temporary new minimums, be aware that as of next financial year, they are increasing back to their pre-pandemic minimums. The legislated change has done its job – keep more capital in the piggy bank ready for the market upswing! As of the 8th of April, the ASX 200 broke the 7000-point mark, almost reaching the highs pre-COVID.
Below is a table of minimum drawdowns and the change in payments as of June 30th 2021:
|Age of beneficiary||Temporary percentage factor (2019/20 and 2020/21)||Normal percentage factor (2013/14 to 2018/19)|
|65 to 74||2.5%||5%|
|75 to 79||3%||6%|
|80 to 84||3.5%||7%|
|85 to 89||4.5%||9%|
|90 to 94||5.5%||11%|
|95 or more||7%||14%|
Source: SIS Act
If you are unsure of your personal situation or have any questions, please give us a call at (08) 8172 9111 or email firstname.lastname@example.org.
Source: BT. 2021. Changes to minimum pension payments. [ONLINE] Available at: https://www.bt.com.au/ [Accessed 14 April 2021].