Pension payments over minimum

Minimum pension

The latest ATO statistics have shown SMSF members in retirement have historically been drawing down more than the minimum pension required.

SMSF trustees in retirement have on average been drawing down significantly more than the minimum pension, even before this amount was halved as a COVID-19 financial relief measure, the latest ATO statistics have shown.

SuperGuardian education manager Tim Miller pointed out the table entitled “Distribution of SMSF members receiving benefit payments by age 2017/18”, included as part of the regulator’s “Self-managed super funds: A statistical overview 2017-18” report, reflects this aspect of trustee behaviour.

“For those people in our preservation to age 60 age bracket, where the average member balance is sitting at roughly $1 million ($1,039,315), the average benefit payment is sitting at about $46,000 ($46,355), which represents 4 per cent or just over 4 per cent,” Miller observed during a recent SuperGuardian technical webinar.

“This is actually more in line with what our minimum pension obligation is and that’s because of the underlying PAYG (pay-as-you-go) withholding tax requirements people need to contemplate at that point.

“But once we hit [age] 60, the average balance jumps up to $1.1 million ($1,100,624) and the average benefit payment jumps up to [around] $68,000 ($68, 215), so it’s sitting at around that 6.5 per cent of the member balance.

“Now we’re still talking about people who are only required to draw down 4 per cent of their benefits, so clearly, and we’re talking averages of course, people are taking over and above their minimum pension requirement.”

According to Miller, this phenomenon indicated in the ATO data emphasises the importance for advisers to formulate the most efficient and effective strategies to facilitate the total amount SMSF clients want to draw down and especially in the coronavirus-affected pension environment.

“[This is important] particularly in a year where they are drawing down potentially what they were previously but their minimum has been halved so they’re actually accessing more money than they legislatively need to,” he said.

To this end, advisers should carefully consider implementing a strategy where drawdowns are made up of a combination of conventional pension payments and partial pension commutations, he recommended.

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