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Why has Switzer remained silent on the changes to super announced in the budget yesterday?
I’m looking for information on these changes and how it will affect the decision for the people doing transition to retirement pension. What is meant by stopping lump sum payments in TTR pensions? Also how will the super funds be broken up for those who have greater than $1,6m? Can the assets be switched between funds?
A: Thanks for the question.
I don’t think we have remained silent, Tony Negline covers these changes in his recent article.
To answer your questions:
a) There is no change to TTR pensions per se. What is changing is that from 1/7/17, the earnings on the assets supporting the payment of a TTR pension will be taxed at 15%, rather than the current 0%. For most people, this nullifies the tax benefits of a TTR pension;
b) Stopping lump sum payments refers to people withdrawing a lump sum and accessing the $195,000 low rate cap;
c) If you have more than $1.6m in pension accounts, then you will be required to reduce this to $1.6m by July 1, 2017. Potentially, you can either withdraw the excess amount, or roll it back into an accumulation super account.
Two points to note. Firstly, these changes have to be legislated, and secondly, there is an enormous amount of detail that has to be worked out. For example, in relation to people who may already have over $1.6m in pension assets, is the $1.6m measured as at the market value of the pension accounts on 1/7/16, on 1/7/17, or is it based on historical amount that was rolled over to the pension phase?
It will take some months before all this is clear.
