Steven says:
Your questions answered on super drawdowns
A few weeks ago we reported on the pending change to the minimum super drawdown rates. Essentially, on 1 July the current rates will be doubled, reverting to the previous rates pre-Covid 19.
At one level, this is fairly straightforward, but as often happens with changes to superannuation, the devil is in the detail. And many of our members are concerned how the detail will be applied in their own particular case. The following questions are the ones that were asked the most. Sometimes it is not possible to give a definitive reply to every question, as personal circumstances can have an impact upon the best course of action. We will always say so when that is the case. But most answers are quite straightforward. Read on to see how our Guru, Steven Sadler (Head of the Customer Service Team) was able to assist.
Janet doesn’t want to be overpaid
My husband & I are on part-Age Pensions, based on the income test. Will the super funds notify Centrelink automatically to let them know the increased minimum drawdown amount for us? Or will we have to notify Centrelink after receiving confirmation from the super funds? We don’t want to be overpaid by Centrelink.
Steven says:
Great question! Super funds do notify Centrelink, usually in March and September each year, so you can just leave it and wait for them to do it. Or, if you are concerned you can request a ‘Centrelink Schedule’ from your Super fund and then lodge this with Centrelink so they are updated sooner rather than later. You will not be penalised if you do not proactively update Centrelink, so it’s entirely up to you.
Geoff asks about switching from decumulation to accumulation
Can I put 50% of my balance, which is in pension (decumulation) phase back into accumulation phase, so as to reduce my minimum drawdown?
Steven says
In some circumstances yes but unfortunately there is no simple answer to your question as it does depend on your personal circumstances
To understand your options and the pros and or cons of each one, it would be best to book one of our Understanding More About Super consultations. As with most of the topics we discuss there are ifs, buts and maybes, so we’d need to understand more about your specific situation to support you to make the best decision.
Michael is used to living on less
I have got used to living on the reduced pension (income stream) payments. When the drawdown doubles, I will have money that I don’t wish to spend. Can it be reinvested back into my super fund? And what are the administrative, taxation and other implications of doing so? Or is it a matter of investing the extra pension in some form of term deposit, for instance.
Steven says:
The ramifications of administration, tax, and superannuation are complex and depend entirely on your individual financial situation. We definitely help provide you guidance to understand each of your options and the pros and or cons of each but would need to know further detail in order to do so. One option would be to book one of our Understanding More About Super consultations.
Neville asks how retirement income streams are assessed
Will the money you get from the drawdown from your super fund reduce the amount of Age Pension that you receive?
Is there a short general answer? I think it is yes, but it depends.
Steven says
Hi Neville thank you for your comment! We have written previously about how account based pensions work and how Centrelink assess them. CLICK HERE to learn more.
(Another) Steven wants to help his son plan ahead
I’ve been encouraging my son to ‘go hard’ on savings in super because he is young. He will have about $30,000 this July, at the tender age of 21.
My question (and I know that you don’t have a crystal ball) is, if his goal in the next 46 years is to invest and ultimately achieve a balance of $2-4 million, will he be able to take that as a lump sum to reinvest? Or will he have to take it as a fixed drawdown?
Steven says:
Congratulations Steven – there’s no time like the present for young adults to learn more about the world of finance. It’s great to hear that you are trying to get your son prepared at such a young age! The rules around super do come with a few ifs, buts and maybes, so to properly guide you and your son on the options available – and the pros and or cons of each – I’d recommend you book one of our Understanding More About Super consultations. If you prefer your son can either sit in with you or make a booking of his own. Click here to check our availability.
Adam wonders how Centrelink will view this transfer
If I’m above Preservation Age (60), but under Age Pension age and was to draw 300K out of my accumulation account, doesn’t Centrelink then count the remaining super as an asset because I have withdrawn this amount and have activated a drawdown from this account? Or does it stay in accumulation after a withdrawal? I was under the impression that once you start withdrawing super it would be assessed by Centrelink.
Steven says:
Hi Adam, thanks for reaching out! Technically the rule is that if your super is in accumulation and you are under Age Pension age then it is exempt. It only becomes assessable when you convert it to an Account-Based pension. Obviously, the funds you draw out would only become assessable once they hit your bank account AND if you/your partner are on an Age Pension.
Garry asks about timing
Drawdowns based on my June 2023 balance are paid in August 2023 by my fund. Will this be subject to the standard or temporary 50% minimum drawdown?
And Alison Squire (Head of Advice) jumps in and replies:
Thanks for your question. You will need to speak to your superannuation fund about whether this payment falls under the current temporary 50% minimum drawdown or not.
Please keep your questions and comments coming. We love to hear from you and we know that for every person that asks a question there are at least ten more wondering about the same things.
I’m confused about the compulsory drawdown. Does this only happen if you have a set income stream? I just access my super as and when we need it. I haven’t accessed it since November 2022. I (we) have been retired for 10 years, have a full pension and very little left in super. I’m trying to hang on to what is there and don’t want to be forced to take money out, especially at the moment when the balance seems to be reducing without my help!
Hi Robyn, thanks for your comment! The compulsory drawdown does only apply to income streams, if your super is still in an accumulation account you are not required to withdraw money from it.
hi what is the difference between accumulation phase and deccumulation phase please
Hi Edna, thanks for your question! We’ve actually covered that topic in a previous article, CLICK HERE to have a read.
I have retired for the past two years and My wife is still working. I have not started to draw down on my super as we can live on my wife’s earning.
Should I start my income stream account or leave my superfund intact till required.
what are the disadvantages of not drawing down the super.
Thanks
Chan
Hi Chan, thank you for seeking our guidance! It is a good question to ask and it would be worth your while to book one of our “Understanding More About Super” consultations. This way we can understand your situation fully and go through the pros/cons relevant to yourself to make the best decision for you. To learn more and make a booking, CLICK HERE.
If a large drawdown/withdrawal is made from a super based pension or bank accounts for the purpose of, for example medical procedure/purchase of a motor vehicle/house repairs etc is notification required given that the amount would be more than $10,000.00?
Hi Peta, thanks for seeking our guidance! Although you didn’t state it I presume you are querying whether you need to notify Centrelink of the withdrawals mentioned? If so then the answer is that you should notify them because the examples you gave are legitimate expenses and so showing Centrelink the significant reduction in your bank/super balance will likely mean you can receive more Age Pension.
The heading is “Your questions answered…” but most questions are not answered, and I have never seen an answer to my previous questions. You just appear to be directing people to your paid sessions.
Hi Allan, thank you for your feedback. I apologise you feel that this article has not been helpful. Due to the sensitive nature of some topics we do need to take the conversation ‘offline’ as it were, rather then going into explicit detail in a public forum such as this. I absolutely do try to answer as many questions as possible via our comments though.
The question from Geoff, “Geoff asks about switching from decumulation to accumulation” simply needs a yes or no answer. Unfortunately for Geoff is had to be done by 23 June. I just did it in time, but was like having a tooth extracted trying to get my Super company to do it.
Allan
Hi Allan, thank you for clarifying your original comment. I appreciate that the answer may seem obvious and in a casual chat with a friend you might simply say yes/no however in the context of us being a business we need to ensure we are diligent even with general information. This is why I replied to Geoff and did answer him by saying that yes it is possible for him to do what he was asking but there are multiple factors that should be considered and as we do not know his personal situation we could not definitively say whether it was a good idea for him or not.
I am on the aged pension but my wife is not as she is not old enough but she is old enough to access her super. Now if my wife takes $50,000.00 from her super and purchases a car with it will it have any bearing on my aged pension
Hi Lew, thank you for seeking our guidance! I am presuming that your pension is being calculated based on your assets (not income) and that your wife’s super is still in accumulation phase (as this is the most likely scenario). If this is true then yes it is likely that your Age Pension would be reduced. The reason is because if your partner is under Age Pension age AND their super is in accumulation then it is exempt from testing. Should you take $50K out to buy a car, her remaining super will continue to be exempt however the new car will now be counted as an asset.
I agree with above comment. A lot of these questions could be answered in a generic sense. You just refer people to your company for answers. Not good enough why don’t you display the charge for accessing this type of help.
Hi Margaret, thank you for sharing your concern. Each week we send out our free newsletter that covers multiple topics designed to provide information and guidance on retirement finances. Some of our readers will also often want more personal help and we provide additional paid services where they are needed. We endeavour to get the balance right between an informative newsletter and promoting these other services. I appreciate your feedback and can assure you we will continue to strive to find that right balance. In the meantime I hope you enjoy receiving our weekly newsletters.
If you choose to receive more than the deemed amount how does this affect your pension?
Hi Judy, thanks for reaching out! There is no direct impact on your Age Pension from drawing more than the minimum. This is because pensions through your super are assessed as assets based on the total balance. There is income that Centrelink DEEM your super pension will earn but again, this is based on the total balance, not the amount you drawdown.
Thank you retirement essentials team keep up the good work your information keeps me across Super and my interest in what is going on, if I did not stumbling on to retirement essentials information. I would be looking and chasing all the questions and answers that you are providing weekly. I understand enough to keep me on the ball. I do think I’ve got enough information by reading between the lines on all the information that you supply free and I am very thankful for it, but I do know where to come if I have a specific worry or question, and you do keep me abreast of all of the taxation, Super, and retirement that I could handle in my brain 83 year old still going well please keep up the good work it’s appreciate.
Hi Ray, thank you for sharing your perspective! We’re very glad to hear how beneficial you are finding our weekly articles, please do reach out if you ever need more personalised support.
Hi Retirement Essentials,
I for one love your free newsletter and I find your free broad information wonderful and informative. I also understand if I would want a more personal issue explained more fully just about me, myself and I. I would certainly contact you direct and pay for the pleasure of your professional services. It would appear some people think even a free service is too expensive. Please keep up the good work. I am appreciative of it.
Hi Malcolm, thank you for the show of support, always good to hear out content is received well!
Thank you to Retirement Essentials, your newsletter is very informative. My question is, if I am of pension age and entitled to a part aged pension. Can I keep all my Super money in accumulation (where it is now) , as to not have to drawdown the 5% per year and still receive my part aged pension?
Hi Sheree, thank you for the feedback! The simple answer is yes, you can leave your super in accumulation, you will not be penalised by Centrelink for this as they assess accumulation and pension accounts the same way. However you may want to speak with someone about whether you should leave your money in accumulation. There are some pros to superannuation pensions such as tax benefits that you might want to learn about so you can make the best decision for yourself. To make a booking and find out if it would be of benefit to you, CLICK HERE.
I am 68 years old and still living on DSP. If I decide to switch to the Age Pension, will I be required to take a superannuation pension or income stream? The only superannuation I have is a private account to which employers have never contributed. I would like to fix up my home which is in need of repair, and then withdraw my funds from superannuation and put them in a bank.
Hi Lorikeet, thank you for sharing your situation with us! The short answer is no you will not be required to set up a super pension/income stream however there are potentially some pros to doing so that you may wish to consider so you can make the best decision for yourself. To make a booking and find out if it would be of benefit to you, CLICK HERE.
If i am on a full pension and then start to draw down 5% of my super, will this give me less pension
Hi Pauline, thanks for your enquiry! Good work taking a proactive look at how to make your super work best for you! You can rest easy knowing that drawing down from your super will not impact the amount of Age Pension you receive.
Regarding
Your ‘super drawdown questions answered’ (https://retirementessentials.com.au/news/superannuation/your-super-drawdown-questions-answered/)-Steven Sadler on June 28, 2023 at 9:29 am
and
‘A younger partner?'(Steven Sadler on September 28, 2021 at 9:44 am)-Steven Sadler on September 28, 2021 at 9:44 am
The answers to the two very similar questions regarding withdrawal from a younger partners accumulation super differ.
On states that upon withdrawal from the accumulation the exemption is removed ( sept 28 2021)
The June 28, 2023 states remaining super will continue to be exempt.
Has there been a change in policy regarding accessing accumulation for younger non pension accumulation super? The more recent answer is more forgiving regarding pension access.
Hi Colin, well done on the great detective work! The way the exemption on a younger partner’s super works as of today (10/07/23) is that the exemption is removed if the superannuation account is transitioned out of accumulation phase and into pension phase. A one off, lump sum withdrawal, would not trigger the exemption to be removed.
I have just completed using your calculations as to whether I am entitled to the age pension. The reply stated that I was not entitled but no specific reason was given. I have made the conclusion that it was because I was not of pension age being 66 and not turning 67 until September of this year. I have though recently received the Commonwealth Seniors Health Card.
However, I am confused after reading some of the questions and replies especially from Pauline Simpson dated 2.7.23. How can it not affect your age pension if you are accessing your super fund ie 5% minimum drawn down amount.
My question is ” how can you have superannuation either in an accumulation or in a pension stream (deaccumulation) and this NOT affect the amount of an age pension “.
Is your entitlement to an age pension based on HOW MUCH you have in your superfund, whether you are accessing it or not. Therefore, Centrelink calculations using this amount as an ASSET and not as INCOME.
Currently I have funds in super in a deaccumulated position (5% minimum draw down), but from what I have read, if I was to shift those funds back into accumulated funds, thereby choosing not to access my super fund, I would be entitled to an age pension. How is that even possible if the government is encouraging people to save for their retirement and not be a burden on the Government.
Maybe this all hinges on the VALUE of your super balance??? Because if I can leave my funds in an accumulated position (ie not use those funds) and use government money ie (obtain the age pension) why wouldn’t I do that, It seems bizzare.
Hi Maddalena, great to hear you are educating yourself on such matter so you can make the best decision for yourself! Centrelink assess superannuation the same way whether it is in accumulation or decumulation phase. That is, they assess the total balance as an asset and then to determine income they applying deeming rules to that same total balance. There are pros and cons to both phases which are worth considering even though Centrelink assesses them the same way. To understand which is best for you I’d suggesting booking one of our Understanding More About Super consultations HERE.
I’m in receipt of my late husbands DFRDB ( Defence Force Retirement and Death Benefits) his super. I get a % of it fortnightly. Will I get an age pension
Hi Jenny, my condolences on your husband’s passing. You may not be eligible for the full Age Pension amount but could still get a partial amount. You can book a consult with us HERE and we can review your eligibility and next steps together.