Clients with Minimum Allocated Pension Payments
This is a special message for our clients with an Allocated Pension who are receiving “minimum” pension payments.
If this isn’t you, you don’t need to be concerned. If it is, please note the following information. If you need clarification, feel free to give the office a call.
Why I am sending this message?
As you might be aware, one of the Federal Government’s COVID-19 initiatives was to temporarily halve what are known Allocated Pension “minimum payment levels” for the 2019-20 and 2020-21 tax years.
They have done this to reduce the amount of capital that Allocated Pension holders may be drawing from their Pension given the dip in financial markets since February, therefore not drawing as much capital.
How this affects you?
Some Allocated Pension providers including AMP, will be automatically applying these new minimums to clients on a “minimum payment” setting from 1st July 2020.
Depending on your age, the changes to minimum payments as a% of your Pension balance are:
|Age||Old Minimum||New Minimum|
|Less than 65||4%||2%|
|65 – 74||5%||2.5%|
|75 – 79||6%||3%|
|85 – 89||9%||4.5%|
|90 – 94||11%||5.5%|
|95 or over||14%||7%|
So, if you are on a “minimum payment” your regular payments will halve from 1st July 2020 to the % above so more capital is preserved.
As minimum payments are only calculated once a year on 1 July, having the percentage halved might actually mean you get less than half of last years’ payments because the reduced % will be based on a lower Pension Account balance.
For example, if you were 66 years old on 1/7/2019 and your Pension balance was $200,000, your minimum payment would have been $10,000 or 5% of the $200,000 this tax year.
If, on 1/7/2020 your Pension balance is $180,000, your minimum payment for next tax year will be $4,500 or 2.5% of $180,000.
As your financial planner, we aren’t particularly happy with product providers automatically reducing payments as we understand this may not suit your living requirements.
What do I need to do?
We know that AMP will shortly send you an email allowing you to change from this default position.
When you receive the email, if you would prefer to continue receiving your current amount, you will need to change your pension settings from receiving a “minimum” to a “specified dollar amount” and enter the amount required. Enter your existing payment if this suits you. You then action this by clicking on a link in the email and submitting your request.
If you are happy receiving the new minimum amount into the new financial year, you do not need to take any action.
If you have any questions about this, please don’t hesitate to email or call us.