Actuaries will need to address a small number of changes in relation to issuing actuarial certificates, despite the government’s decision to keep them in place for unsegregated funds when claiming exempt current pension income (ECPI).
“As actuaries, we will need to make some small modifications to our calculations in relation to the 2017/18 year, though there’s nothing that’s urgent for us there,” Lime Actuarial director Greg Einfeld told selfmanagedsuper.
“The changes will be because at present, investment income earned in relation to transition-to-retirement (TTR) pensions is exempt from tax and that exemption will be removed for TTR pensions from 1 July, so that will have a number of implications.
“It will mean that it will slightly change the data that we’ll need to collect because at the moment we collect data on whether a fund has accumulation balances or pension balances.
“Going forward, we’ll need to separate the pension balances into account-based pensions and TTR pensions because they’ll be looked at separately.”
Einfeld added there would also be some implications for individual funds.
“So a fund that is currently all in TTR or accumulation would require an actuarial certificate – that fund won’t need a certificate going forward because none of the fund will be exempt from tax,” he said.
“But on the flip side, you could have a fund today that’s entirely in an account-based pension and has, say, $2 million as the balance of a one-member fund, and going forward that member will need to commute $400,000 of that balance back to accumulation.
“Historically, that fund has not had a requirement for an actuarial certificate. Going forward, that fund will have a requirement for an actuarial certificate.
“So there are a few changes there, but nothing as drastic as what we would’ve seen if the government’s original proposal had come into play.”
Einfeld’s comments follow Treasury’s decision to uphold the requirement to obtain an actuarial certificate for unsegregated, or proportional, funds when claiming ECPI, a move applauded by SMSF industry executives, who have labelled it a positive outcome for the sector’s integrity.
Issued last week, the Treasury Laws Amendment (Fair and Sustainable Superannuation) Regulations 2017 confirmed the need for an actuarial certificate to claim ECPI when the assets of an SMSF are not segregated.
“The decision means the integrity in the system will be maintained by having actuaries overseeing these calculations,” Einfeld said at the time.
“Keep in mind that there’s nearly $20 billion of ECPI claimed every year, so having trusted professionals, such as actuaries, overseeing that can only be a good thing.
“And trustees and accountants will continue to have access to actuarial certificates that are low cost and easy to obtain, so everybody should be pleased with the outcome.”
