Industry confusion about transition-to-retirement income streams (TRIS) in retirement phase in relation to account-based pensions (ABP) could be alleviated by allowing a TRIS to be called an ABP once a member has met the conditions of release with a nil cashing restriction, an SMSF expert has said.
In a blog post on the SuperConcepts website, SMSF technical services executive manager Mark Ellem highlighted the differences in opinion across the industry about the relationship between a TRIS in retirement phase and an ABP.
“There’s been debate about whether a TRIS automatically converts to an ABP once the member meets a condition of release with a nil cashing restriction, which at the very latest is attaining age 65,” Ellem said.
“I agree that a TRIS does not automatically convert to an ABP once the member satisfies the relevant requirements. However, my reasoning is that it was always an ABP in the first place and consequently does not need to convert to something it already is.”
He noted when the restrictions in the TRIS definition fell away as a result of a member with a TRIS meeting a condition of release with a nil cashing restriction, what they would be left with was an ABP. Allowing a TRIS in these circumstances to be called an ABP would lessen industry confusion, he said.
“In the spirit of making superannuation law easier to understand, it would make sense to simply change the law to allow a TRIS to be called an ABP once the member has met a condition of release with a nil cashing restriction,” he added.
He pointed to ATO Guidance Note 2019/1 published in July, which sparked discussion across the industry about the impact on a TRIS when members moved into retirement phase.
“Let’s focus our effort away from the debate on the ATO’s view of a TRIS and ask the government to make a simple change to clear up a lot of confusion for us and, more importantly, our clients,” he said.