The Federal Government has brought in changes to help people in retirement who hold pensions and annuities.
The government is temporarily reducing the minimum amount you can withdraw from your pension for this financial year and the next. While not everyone will be in a position to do this, it may be helpful for retirees who want to conserve their assets now and avoid selling after markets have fallen.
This episode in our Q&: Understanding Retirement series looks at the Australian Government’s temporary reduction of the minimum pension withdrawal amounts.
Find out how these changes affect the minimum payment amount you must withdraw from your pension this financial year, and also learn whether taking the minimum drawdown amount is the best approach for you.
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How it works
Each financial year, the government requires you to withdraw a certain amount from your pension – this is called your minimum income amount. The government has reduced this minimum amount temporarily, which means you’ll withdraw less income from your pension, leaving more in your account for later.
For those with account-based (allocated) pensions and annuities, your minimum income amount is calculated on 1 July each year by applying your age-based percentage to your account balance.
The minimum income amount has been reduced by 50% for the 2019-20 and 2020-21 financial years, and below are the previous and new minimum income rates for different age groups:
|Minimum annual income amounts|
|Age||Standard rates (currently shown in your PDS) % of your account balance||Reduced rates for 2019-20 and 2020-21 % of your account balance|
|95 or more||14%||7%|
After 30 June 2021, the standard rates will be reinstated.
For those with term-allocated pensions, your annual payment will be calculated on 1 July 2020. So, if you’d prefer to receive a lower payment than what’s calculated for you, you can reduce it to as low as 45% of your annual payment amount.
For the 2019-20 financial year
You can choose to reduce any upcoming payments subject to the new minimum pension amount. If you’ve already received the reduced minimum income amount for this financial year, you can choose to cancel further payments until 30 June 2020.
For any accounts opened after 30 March 2020 the new minimum income amount will automatically apply if you elected to receive the minimum payment. You can also choose to receive a higher payment if you prefer.
For the 2020-21 financial year
If you’ve elected to receive the minimum pension payment, the new minimum pension rates will be automatically applied to your account for the 2020-21 financial year.
How to make changes to pension payments
It’s a good idea to check your current pension payment arrangement before making any changes. If you’re an AMP client, you can do this by logging into My AMP.
If you’d like to change your pension payment amount, frequency or date, you can:
You can also find out more, including how to make changes for your particular AMP pension account, by checking out the frequently asked questions.
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