Financial advisers need to ensure clients are choosing the correct condition of release to allow access to the full amount of their superannuation by understanding what it means to be retired according to the law, an advice technical specialist has noted.
BT head of financial literacy and advocacy Bryan Ashenden pointed out that Superannuation Industry Supervision Regulation 6.01(7) states retirement has occurred if a person who has reached preservation age and is under 60 has ended an arrangement under which they were gainfully employed and the trustee of their super fund is satisfied they do not intend to work again, on a full or part-time basis, which is more than 10 hours a week.
The regulation adds for those aged 60 or over, retirement has occurred if their employment arrangement has come to an end and either they reached that age on or before ending employment or the trustee was satisfied they did not intend to work again on a full or part-time basis.
Ashenden said these two limbs of the definition were important in ascertaining whether someone had retired for superannuation purposes and how much of their benefits they could access.
He gave the example of Justin, who finished working at age 57 with a super balance of $410,000, but then took on part-time employment of 15 hours a week and now at age 61, with a balance of $520,000, had reduced those hours to less than 10 a week.
“Often people will look at a scenario like this and say they retired a couple of years ago and we are now looking to access their super and tick the first retirement option, which stated I reached age 60 and stopped a job after that,” he said.
“What you will see superannuation funds generally ask for then is what was the date that that employment ceased. You put in the day and the fund will release what was there at that point in time.
“Anything that comes in after that is going to remain preserved until you satisfy a condition of release in relation to those new monies.
“If you were to tick the box that said I have retired and never intend to work for more than 10 hours per week, that releases everything that has accumulated up to that point in time.
“Any new contributions will still be preserved, but you could use the same condition of release that you met in the past because you are still retired with no intention of working for more than 10 hours per week to be able to access those monies.
“It is important always to make sure if we’re ticking a box on a form with a client, in terms of releasing an amount of money to move into a pension phase or to withdraw as a lump sum, that we are thinking about what is the right condition of release we should be choosing in those circumstances.”
