Pensions, Regulation, Superannuation

Minimum pension normalcy back

Minimum pensions

Last night’s budget gave the industry a very good indication that minimum pensions will be returning to pre-COVID rates from 1 July 2023.

An SMSF technical services leader has noted the 2023 federal budget did not include any information about minimum pensions and has concluded these payment obligations will return to what are considered standard levels.

“[There was] no announcement in relation to a further extension to SIS (Superannuation Industry (Supervision)) [Regulations] minimums, meaning that SIS minimum [pensions will] return to their normal settings come 1 July this year,” Challenger head of technical services Andrew Lowe told attendees of a budget review today.

“So we’ve had an extended period in a post-COVID blip environment where we saw SIS minimum [pensions] reduced. That is coming to an end on 30 June this year and we are back to full [amounts] from 1 July.”

In light of this development, Lowe recommended advisers review their clients’ retirement income needs and rebalance any of the arrangements employed over the past few years should this reinstatement of standard minimum pensions cause an unwanted spike in their pension drawdowns.

While his assessment of this situation is as it stands currently, he did concede the exclusion of this issue from the budget did not mean the government will not extend the reduced minimum pension levels before the end of the financial year.

“We’ve seen in prior years where very, very late in the piece [the government has reduced minimum pensions],” he noted.

“So yes it is entirely possible we would get [an extension], but [there] was no guidance last night.”

He also highlighted the fact the budget made no mention of the government’s intention to enshrine the objective of superannuation into law.

“[There was] effectively no further guidance from the government last night [on where this legislation sits], but the government now has in place the feedback [from the consultation period] to take this measure forward,” he said.

Further, he pointed out no changes were made to the timeline for increasing the superannuation guarantee from 10.5 per cent to 11 per cent on 1 July 2023.

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