UPDATED: On Saturday 29 May 2021, the Government unexpectedly announced an extension of the temporary reduction in superannuation minimum drawdown rates through to financial year 2021/22.
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 was supposed to be ending on the 30th June 2021. The Government has just recently extended the change for another 12 months and will now end on the 30th June 2022. If you have taken advantage of the temporary new minimums, be aware that as of 21/22 financial year, they are increasing back to their pre-pandemic minimums.
Below is a table of minimum drawdowns and the change in payments as of the newly extended timeframe of June 30th 2022:
New minimum pension drawdown rates
|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
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Source: BT. 2021. Changes to minimum pension payments. [ONLINE] Available at: https://www.bt.com.au/ [Accessed 1st June 2021].