The Government is helping retirees to manage the impact of volatility in financial markets on their retirement savings by temporarily reducing superannuation minimum drawdown requirements.
The Government is temporarily reducing superannuation minimum drawdown requirements for account-based pensions and similar products by 50 per cent for the 2019-20 and 2020-21 income years.
Temporary reduction in Superannuation Minimum Drawdown Requirements
This measure will benefit retirees with account-based pensions and similar products by reducing the need to sell investment assets to fund minimum drawdown requirements.
The reduction applies for the 2019-20 and 2020-21 income years.
| Age | Default minimum drawdown rates (%) | Reduced rates by 50 per cent for the 2019-20 and 2020-21 income years (%) |
| Under 65 | 4 | 2 |
| 65-74 | 5 | 2.5 |
| 75-79 | 6 | 3 |
| 80-84 | 7 | 3.5 |
| 85-89 | 9 | 4.5 |
| 90-94 | 11 | 5.5 |
| 95 or more | 14 | 7 |
This measure will have no impact on the underlying cash balance for 2019-20 and a negligible impact in 2020-21.
Example – Mike is a 66 year old retiree with a superannuation account-based pension.
The value of Mike’s account-based pension at 1 July 2019 was $200,000. Under current minimum drawdown requirements, Mike is required by legislation to drawdown 5 per cent of his account balance over the course of the 2019-20 and 2020-21 income years.
This means Mike has to drawdown $10,000 by 30 June 2020 to comply with the minimum drawdown requirements.
Following the temporary reduction in minimum drawdown requirements, Mike will now only be required to drawdown 2.5 per cent of his account balance, that is, $5,000, by 30 June 2020. If Mike has already withdrawn over $5,000 for 2019-20, he is not able to put the amount above $5,000 back into his superannuation account.
On 1 July 2020 the value of Mike’s account-based pension is $180,000 (after drawdowns and investment losses). During 2020-21, Mike is required to drawdown 2.5 per cent of his account balance, which is $4,500, instead of $9,000.
As a result of this change to minimum drawdown requirements, Mike is able to preserve his capital while still drawing an income from his superannuation.
If you are unsure how this affects your pension contact us on 03 9838 3055.
Disclaimer
This information is for general information only and does not constitute financial advice or take into account your personal needs, objectives and financial situation. Before making any decisions, we recommend you seek professional advice.
Source: treasury.gov.au/coronavirus