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HOME SUPER CHOICE SUPERANNUATION SMSF FIND LOST SUPER FAQ PENSIONS FAQ ACTUARY FINANCIAL LITERACY INVESTMENT SECTORS INVESTMENT MODEL FINANCIAL PLANNING SHARE TRADING WHAT BANK ACCOUNT LIFE INSURANCE BOOKS & TOOLS PORTFOLIO SYSTEM ABOUT US WHY SUPEREASY SMSF BENEFITS SERVICES OVERVIEW FEES SMSF SET UP SMSF ADMIN SPECIAL OFFERS CONTACT |
Pensions Frequently Asked Questions Self Managed Superannuation Fund (SMSF) is able to provide its members with a pension. There are two main types of superannuation pensions, Allocated Pensions and Complying Pensions. Allocated Pension is a pension where a fund provides an income stream to the members on retirement, from a lump sum set aside (i.e. allocated) for that purpose. Complying Pension is a pension that must:
What are the advantages of an Allocated Pension? Allocated Pension is just one type of benefit a SMSF can pay to its members. Earnings within an Allocated Pension are not taxed, regardless of these earnings being income or capital gains. However, amounts withdrawn from an Allocated Pension fund are taxable, but there could be an allowable deductible amount and a personal tax rebate. Allocated Pensions are very flexible because they allow the member to choose how much income is received, or "allocated", each year, within minimum and maximum limits. You can check out these limits by using our free Allocated Pension Calculator (from www.supereasy.com.au select Pensions" menu button option). With an Allocated Pension, a member is also able to withdraw lump sum amounts from the account in addition to the pension amount. The other attraction of an Allocated Pension is that any capital sum of an Allocated Pension remaining at the death of the member can be paid to the member's dependants or to the estate. What are the advantages of Complying Pensions? Complying Pensions are another type of pension a SMSF can pay to its members. There are two types of Complying Pensions: Fixed Term Complying Pensions and Lifetime Complying Pensions. Complying Pensions are less flexible than Allocated Pensions but have other advantages. What is the main difference between Allocated and Complying Pensions? The main difference between Allocated Pensions and Complying Pensions is "the Age Pension test". This is because the assets used to acquire the Complying Pension are not treated as assets under the Age Pension assets test and the deductible amount is excluded from the income test. This means members can often have significant assets and still get all or part of the Age Pension, and the various fringe benefits connected to it. Superannuation benefits used to pay Allocated Pensions are treated the same as any other assets. The other difference is that Allocated Pensions are subject to the lower lump sum RBL, whereas Complying Pensions are subject to the pension RBL. This means more money can be invested in a Complying Pension than an Allocated Pension. There is also a difference on death of a member; an Allocated Pension capital sum is able to be paid out on death of the member or or whereas with a Complying Pension a Revisionary Pension is paid on the death of a primary or reversionary beneficiary. How does an Allocated Pension work? SMSF pays a pension out of the member's benefit account. The member decides each year how much income will be paid as a pension, within upper and lower limits set out in the superannuation law. The member can choose to vary this amount each year, or even more frequently. The member may choose to withdraw capital amounts from the account. These withdrawals will be treated as eligible termination payments ("ETPs") in the member's hands. Tax on withdrawal is computed under the rules applying to ETPs. Allocated Pensions are usually paid for as long as there is money in the member's account or until the member dies. The term therefore depends on the age of the member, the amount in the account, how much the member draws as a pension each year, the amount of any commutations (ETPs) and the underlying investment performance of the SMSF. If a member dies the balance of the account may be used to pay a pension to a dependent of the member, or it may be paid as a lump sum to either a dependent of the member or the member's estate. What are the Upper (Max) and Lower (Min) Limits of an Allocated Pension? SMSF pays a pension out of the member's benefit account. The member decides how much income will be paid as a pension, within upper and lower limits set out in the superannuation law. The law specifies a formula to calculate the min and max limits paid to a member each tax year. The member must take the min pension amount, and cannot take more than max pension amount from the fund each tax year. Click here if you want to find out more about pensions. Clients of SuperEasy® enjoy a bonus 0.25% p.a interest on top of the current interest rate with ANZ V2 PLUS account. Click here to find out more. 
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SuperEasy Pty Ltd is not licensed to provide advice on investments, or legalities of the types of investments that you can have. SuperEasy® strongly recommends that you seek professional advice before making any investment choice or decision! |
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