No.085
Tuesday September 27, 2005
OUTCOMES OF THE REVIEW OF PENSIONS IN SMALL SUPERANNUATION FUNDS
The Government today announced its response to the review of the provision
of pensions by small funds.
The review was established to examine options for small funds to provide pensions
to their members, while addressing the Government's taxation, social security,
retirement income and prudential concerns.
"The Government's response aims to improve the choices available
to all retirees, including those in small funds. It will give retirees greater
flexibility in meeting their retirement income needs", the Minister for
Revenue and Assistant Treasurer, Mal Brough, said.
The Government has decided to provide more flexibility to the market linked
income stream (MLIS) by:
- extending the term of the pension so that payments can continue until the
member reaches age 100 (or until a person's spouse reaches age 100).
Currently the term of the MLIS is based on the life expectancy of the member
or their life expectancy as if the member was five years younger. (A longer
term is possible if the pension is a 'reversionary' pension.)
- allowing annual MLIS payments to vary between plus or minus 10 per cent.
These changes will apply to new pensions commencing from 1 January 2006.
The Government will also update the allocated pension drawdown factors in line
with current life expectancy. The changes will apply to new pensions commencing
from 1 January 2006. This will better enable retirees to draw down their capital
over their whole retirement.
"The enhanced market linked and allocated products will help manage longevity
risks and provide more stable income", Mr Brough said.
As announced by the Government in June 2005, people who were members of a small
fund on 11 May 2004, and who retire on or after age 55, or reach age 65, prior
to 1 January 2006, still can commence a defined benefit pension. The member
must become entitled to the pension prior to 1 January 2006 with payments commencing
within 12 months of the entitlement date.
The Government would like to thank all parties for their efforts in providing
submissions to the review.
Media contact: Carlie Hogan - (02) 6277 7360