The Government has announced an extension of the temporary reduction in superannuation minimum drawdown rates for a further year to 30 June 2022.
While not everyone will be in a position to do this, it may be helpful for retirees who want to conserve their assets and don’t require all of the income required to be drawn from their income stream.
The reduction applies to account-based and market-linked pensions. This also applies to Transition to Retirement Pensions. There is no change to the maximum drawdown limit.
If you hold a term allocated pension, you are normally able to vary your pension payments between 90% and 110% of their annual payment amount. The reduced minimum will allow you to vary payments between 45% and 110% of the annual payment amount
The below table summarises the reduced annual minimum pension payment factors for account-based pensions.
| Age on 1 July | Reduced minimum for 2021/22 | Minimum for 2022/2023 and future years |
| Under 65 | 2% | 4% |
| 65 to 74 | 2.5% | 5% |
| 75 to 79 | 3% | 6% |
| 80 to 84 | 3.5% | 7% |
| 85 to 89 | 4.5% | 9% |
| 90 to 94 | 5.5% | 11% |
| 95 or older | 7% | 14% |
Things to consider
Drawing the reduced minimum is not necessarily the right thing for everyone. Some things you may want to think about are:
- If you have elected to draw the minimum pension payment, most providers will automatically apply the reduced minimum payment unless you request a change to your pension payment amount.
- You can elect to increase your pension payment at anytime throughout the Financial Year, or draw lump sums.
- Although it can be a good idea to preserve capital in your investment if you do not require the income, your investments were setup originally to provide you with income. If you retirement plans are on track, and drawing the reduced minimum would require you to reduce your standard of living, it may not be the best thing for you.
If you would like to discuss your personal situation in more detail, contact us today.
