A senior SMSF executive has warned advisers to ensure a client has satisfied the legal definition which prove the individual is actually retired before implementing any superannuation drawdown strategies.
Heffron senior technical specialist Annie Dawson said it is imperative advisers take this action and not just take the client’s word they are retired because the consequences can be adverse and severe.
“Be careful when the client is sitting across the desk from you saying ‘I am retired’ because we’ve seen cases where people are almost retired, but they’re on gardening leave or they’re getting their leave paid out,” Dawson told delegates at last week’s Heffron Super Intensive Day 2022 held in Sydney.
“And because we like to help our clients smooth out income, they were officially getting everything paid out in July for their leave and such when [the conversation was in] June, and they weren’t going back into the office.
“[In one particular instance] unfortunately they started a retirement-phase pension and [were deemed to] have illegal early access issues.
“So when someone says ‘I’m retired’ ask them more questions [about the associated details].”
According to Dawson, the adviser needs to determine in these circumstances when the individual retired, be able to sight the payment summary they should have received upon retirement and establish whether or not all of their leave entitlements have been paid out.
She noted the issue is very important from a strategic point of view for clients due to the opportunities that come with meeting the legal definition of being retired.
“[Retirement is a good thing because] it is a full condition of release with nil cashing restrictions. That [means] your clients can take their money out of super [any way] they like. That can be [via] lump sums or retirement-phase pensions,” she said.
