Those who have allocated or account based pensions know that there is a minimum amount that has to be drawn from the allocated pension each year.  The minimum amount is arrived at by dividing the account balance as at 1 July each year by the minimum percentage factor shown in the table below, according to the then age of the person. 

For the last couple of years the government has allowed the minimum drawndown amounts to be reduced by 50%. This was done because of an acknowledgement by the government that many self-funded retirees had suffered significant capital losses during the financial crisis, from which they had not yet recovered. The drawdown relief therefore would assist those people by reducing the need for retirees to sell assets at a loss in order to meet the minimum payment requirement.

The government has just announced that this relief will be extended another year. That means that retirees will be afforded a 50 per cent reduction in the minimum drawdown amounts for account-based, allocated and market-linked pensions for the 2010-11financial year. That means that for example, a person under age 65 need only draw 2% of their account balance during this financial year.

This relief measure has been generally welcomed. The Small Independent Superannuation Funds Association (SISFA) has called for the relief to be extended permanently though the government is unlikely to accede to this request.  

POSTED: 01-Jul-2010

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