The lack of further news in the federal budget in regards to an amnesty for legacy pensions means some SMSF advisers and members may have to use current laws to exit them, according to an SMSF administrator.
Heffron SMSF technical and education services director Leigh Mansell said despite an announcement by the previous government that it would introduce a two-year amnesty to exit legacy pensions, this week’s budget contained no further comment on any plans to enact that amnesty.
Instead, Mansell suggested those unable to exit legacy pensions consider using new laws that took effect from 5 April that allow a pension that would create an excess transfer balance when commuted to be converted to a new market-linked pension (MLP) that could then be commuted.
“There was nothing in terms of an amnesty [in the budget] so we are not sure where the government sits on this, but my understanding is there are still conversations happening behind the scenes,” she said during a post-budget briefing today.
“In April there was a change to the super law and for some people if they are able to create an excess transfer balance cap, the law has been changed so they might be able to escape their legacy pension arrangement altogether.
“The law changed and it implemented a fix to the excess transfer balance release issues and that law fix is going to help some people escape these things.”
She noted the change introduced in April was likely to be more useful for those with larger pension balances, particularly where they could create an excess and force the steps needed to exit the MLP.
“If you have clients that have legacy pensions, you may want to have a chat to see whether there’s any viability for them and put the amnesty off to the side because we don’t know where that’s headed, and you might find they could get out sooner rather than later,” she said.
