The Australian Federal Government has proposed two key measures to help retirees and those receiving income support to manage the financial impact of COVID-19.
1. Lower minimum pension drawdown rates
The government has announced a 50% reduction in the minimum income drawdown from account-based pensions and similar products for 2019-20 and 2020-21.
This means Australian retirees can reduce income payments from their superannuation-based pensions or income streams to minimise the need to sell down assets in depressed markets.
If you’ve already taken 50% or more of the required minimum payment for 2019-20 you or your financial adviser will be able to cancel any further payments until 30 June 2020 with your super fund.
It’s not compulsory so if you’d prefer to maintain your income you don’t need to take any action.
Case study: Maria's account-based pension1
On 1 July 2019, Maria was 67 and the balance of her account-based pension was $200,000. So her minimum pension payment for the 2019-20 financial year was calculated as $10,000 ($200,000 x 5%).
Under the new temporary reduction in minimum pension payment, Maria will now only have to receive a minimum annual payment of $5,000 in 2019-20. However, if Maria has already received more than $5,000 from her account-based pension since 1 July 2019, she won’t be able to return any excess amount above $5,000 into her pension.
On 1 July 2020, Maria will be 68. Let’s assume the balance of her account-based pension is $180,000. Maria can now choose to receive a minimum annual payment of $4,500 from her pension ($180,000 x 2.5%).
2. Lower deeming rates
The government has also announced a further 0.25% reduction in deeming rates to reflect the low interest rate environment.
This means Australians receiving the Age Pension and income support will have less income assessed from their financial investments.
If you’re income tested the reduced deeming rate may result in an increase in your social security entitlements.
New deeming rates
|Status||Thresholds||Current deeming rates||Deeming rates effective 1 May 2020|
|Single pensioner and allowee||First $51,800||1.00%||0.25%|
|Balance over $51,800||3.00%||2.25%|
|Partnered pensioner||First $86,200||1.00%||0.25%|
|Balance over $86,200||3.00%||2.25%|
|Each member of an allowee couple
|Balance over $43,100||3.00%||2.25%|
The new drawdown and deeming rates will come into force from 1 May 2020, following the passage of legislation.
Great leadership needed to help women engage with super31 January 2020 | Grow my wealth AMP's Lara Bourguignon looks at what female leaders are doing to inspire progress and what more needs to be done with super. Read more
The new decade starts on a high note for Australian women26 February 2020 | Grow my wealth Positive news for Australian women after the economic progress measurement, the Financy Women’s Index, posted its best performance of 2019 in the December quarter. Read more
COVID-19 and the job market29 May 2020 | Grow my wealth How COVID-19 is affecting the Australian employment market and what it means for your job. Find out more with AMP Read more
This information is provided by AMP Life Limited ABN 84 079 300 379 (AMP Life). It is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances and the relevant Product Disclosure Statement or Terms and Conditions, available by calling 13 30 30, before deciding what’s right for you. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.
All information on this website is subject to change without notice. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek professional advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability for any resulting loss or damage of the reader or any other person.
The information on this page was current on the date the page was published. As a result of changes to the business from time to time, including changes to product, product issuer, services, trust, trustees and other entities, the information may no longer be current. For up to date information, we refer you to the relevant product disclosure statement and product updates.