The Actuaries Institute was right to call for legacy pensions reform in its recent submission to Treasury, according to an actuarial services provider.
In a blog post on its website, Accurium said it hoped the Actuarial Institute’s move to join the SMSF Association and Tax Institute in calling for change would encourage the federal government to take action and help retirees trapped in SMSF legacy income streams.
“Retirees who entered into [legacy pensions] in the late ‘90s and early ‘00s have found themselves unable to get out of them. They are complex and costly to manage, with the potential for some very undesirable outcomes should they become insolvent or when they cease due to death or expiry,” the firm said.
“The 2016 super reforms added further complications with a raft of complex legislation needed to deal with the transfer balance cap, some of which we are still waiting to be enacted in a workable form.”
It highlighted the significance of the Actuaries Institute asking for legacy pensions reform in particular as actuaries were likely to be adversely affected if the government took action allowing retirees to be freed from their SMSF legacy income streams.
“The requirement for an annual actuarial valuation to ensure solvency means actuaries will be one of the few groups to lose out on work should trustees be allowed to cease these pensions,” it noted.
“However, as actuaries dealing with these pensions every day, we see first-hand the difficulties these retirees face. Many of these retirees are now in or approaching their eighties and are looking to simplify their financial affairs by winding up their SMSFs. The restrictions inherent in these pensions means that can be very difficult, if not impossible, to do.
“We support changes to help retirees who want to exit these arrangements.”
It also welcomed smaller changes suggested by the institute in its submission, such as allowing capital that remained after a member died or a term pension expired to be paid out as a lump sum as a much-needed step towards easing the uncertainty faced by retirees locked into legacy pensions.