Q: I have retired and moved my superannuation benefit into a superannuation pension. I know I am required to draw a minimum amount of income each year but I don’t know how much. Can you help me?
A: Retirees who have moved their super benefit into a superannuation pension, as you have, must arrange for a minimum pension amount each year, which is expressed as a percentage of their account balance.
They can draw down more (there is no maximum) but they must meet the minimum.
Minimum pension percentages are age based and may be subject to change (as they were during the financial crisis).
The minimum percentages for the 2018/19 year are as follows:
- for retirees aged 55 to 64, the minimum is 4 per cent of their account balance;
- for retirees aged 65 to 74, the minimum is 5 per cent of their account balance;
- for retirees aged 75 to 79, the minimum is 6 per cent of their account balance;
- for retirees aged 80 to 84, the minimum is 7 per cent of their account balance;
- for retirees aged 85 to 89, the minimum is 9 per cent of their account balance;
- for retirees aged 90 to 94, the minimum is 11 per cent of their account balance; and
- for retirees aged 95 and over, the minimum of 14 per cent of their account balance.
A special rule applies to transition to retirement pensions, limiting the maximum annual income payout to 10 per cent of the account balance.
Andrew Yee, director, superannuation at HLB Mann Judd Sydney, says most retirees draw down the minimum, fearing that they might run out later in life.
Yee says there have been recent studies showing that retirees tend to be overly cautious and many could afford a higher income without taking on any added longevity risk.
This may be an area where you could get some advice before setting your income level.