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  • Minimum annual payments for super income streams

    Certain superannuation pensions and annuities are subject to rules that determine minimum and maximum amounts to be paid in a financial year.

    A minimum amount must be paid each year for pensions or annuities you commence on or after 1 July 2007.

    There is no maximum amount which must be paid unless it is a transition to retirement pension. A maximum amount of 10% of your account balance applies for transition to retirement pensions which are not in retirement phase.

    The minimum payment amounts have been halved for certain pensions and annuities for the 2008–09, 2009–10 and 2010–11 years and reduced by 25% for the 2011–12 and 2012–13 years. The reductions in these years apply only to account-based pensions and annuities (allocated pensions and annuities and market-linked pensions and annuities).

    COVID-19 (novel coronavirus) – temporarily reducing superannuation minimum payment amounts

    For many retirees, the significant losses in financial markets as a result of the COVID-19 crisis are having a negative effect on the account balance of their superannuation pension or annuity.

    To assist retirees, the Government has reduced the minimum annual payment required for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities by 50% for the 2019–20, 2020–21 and the 2021–22 financial years.

    Superannuation and annuity providers calculate the minimum annual payment required as at 1 July each year, based on the account balance of the member or annuitant. The 50% reduction will apply to this calculated minimum annual payment.

    Note: Pension payments for the 2019–20 year above the reduced minimum withdrawal rate, taken before 25 March 2020, cannot be re-categorised as a lump sum or commutation, even if a valid minute or election from the member was in place before the government announced reduction.

    Example

    Robert is 67 years old. At 1 July 2019, Robert’s account based pension balance was $480,000. Robert’s minimum annual payment was calculated at 5% (the percentage applicable to his age) of his pension balance, which is $24,000. Following the law change, Robert’s required annual minimum pension payment for 2019–20 is $12,000.

    If Robert has already withdrawn more than $12,000 for 2019–20, he is not able to put the amount above $12,000 back into his superannuation account unless he’s eligible to make superannuation contributions and subject to any other rules or limits such as contribution caps.

    End of example

    Superannuation pensions and annuities that have already commenced

    For pensions and annuities that commence part-way during the 2019–20 or the 2020–21 financial year, the 50% reduction applies to the minimum annual payment that is calculated proportionally on the account balance on commencement day.

    Example

    Thomas commences an account-based pension on 1 January 2020 at age 66. His pension account balance on the commencement day was $250,000. Under current minimum drawdown requirements, his minimum annual payment amount would be $12,500 (5% of $250,000). As the pension commenced on 1 January 2020, the required minimum amount is calculated proportionately from the commencement day to the end of the financial year:

    $12,500 (minimum annual payment amount) × 182 (days remaining) ÷ 366 (2020 is a leap year) = $6,215.

    Following the temporary reduction in minimum drawdown requirements, Thomas is only required to drawdown 2.5% of his account balance, which is $3,107 ($3,110 rounded up to the nearest 10 whole dollars). If Thomas has already withdrawn over $3,110 for 2019–20, he cannot put the amount above $3,110 back into his superannuation account unless he’s eligible to make superannuation contributions and subject to any other rules or limits such as contribution caps.

    End of example

    See also:

    Table 11: Minimum percentage factor for certain pensions and annuities (indicative only) for each age group

    Age

    2008–09 to 2010–11 income years (inclusive)

    2011–12 to 2012–13 income years (inclusive)

    2013–14 to 2018–19 income years (inclusive)

    2019–20 to 2021–22 income years (inclusive)

    Under 65

    2%

    3%

    4.0%

    2%

    65–74

    2.5%

    3.75%

    5.0%

    2.5%

    75–79

    3%

    4.5%

    6.0%

    3%

    80–84

    3.5%

    5.25%

    7.0%

    3.5%

    85–89

    4.5%

    6.75%

    9.0%

    4.5%

    90–94

    5.5%

    8.25%

    11.0%

    5.5%

    95 or more

    7%

    10.5%

    14.0%

    7%

    Note: These withdrawal factors are indicative only. To determine the precise minimum annual payment (especially for market linked income streams), refer to the pro-rating, rounding and other rules in the Superannuation Industry (Supervision) Regulations 1994.

    Last modified: 30 Jul 2021QC 18123