superannuation, super drawdown, decumulation

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.