Crystal Wealth Newsroom

The pension changes you need to know about

Money Tips

The rules and regulations regarding how you can use your super to fund your retirement are often tweaked and changed – even more so as the Government create ways of helping people minimise the financial impact of COVID-19, so it’s important to keep abreast of how those changes may affect you. Here’s what you need to know.

Transfer Balance Cap Indexation set to rise

At present, the maximum amount of your super balance that can be converted to pension phase is $1.6 million, which means the remainder of your super balance remains in accumulation phase where the earnings are taxed at 15% versus pension phase where it is tax-free.

This cap is known as the Transfer Balance Cap (TBC) and it is expected it will be indexed on 1 July 2021 to $1.7 million.

Lisa Fowler, Head of Advice & Investments at Crystal Wealth Partners says, “For those of you considering commencing a pension, it may be beneficial to wait until 1 July to maximise the amount you are able to convert to pension.

“We’ll know whether it will index on 27 January, when CPI is announced, so we’ll be able to help clients with their plans regarding this very soon.”

Minimum pension drawdown halved

Minimum pension requirements have been halved again in 2020/21.

This change was announced in March 2020 when sharemarkets plunged due to the coronavirus crisis, with the intention of assisting retirees who do not wish to sell assets to fund pension payments while asset values are reduced.

Therefore, the standard pension drawdown percentage is halved – for example, if your minimum pension requirement is 4%  it will be reduced to 2%.

If you’d like some guidance around pensions regulations, give the Crystal Wealth team a call.

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