New Form of Complying Superannuation Pension

November-December 2004

Previously, the law gave members of self-managed superannuation funds (“SMSF”) only two alternatives for pension benefits:

  1. an allocated pension, which would be limited to the Lump-sum Reasonable Benefit Limit (“RBL”), leaving the excess vulnerable to the maximum tax rate as an “excess benefit”, or
  2. buying a complying pension (usually from a life insurance company) to attract the Pension RBL (twice the amount of the Lump-sum RBL), but with special rules that jeopardised the residual capital on death in favour of the issuer.

Unless a SMSF had in its rules as at 12/05/2004 (as Baldwins trust deeds have had) provision for payment of a complying pension from the fund itself, a complying pension from the trustee of the SMSF to attract a higher RBL was not a possibility.

Legislation now allows for a new “complying market-linked pension” (the product is being called a “Term Allocated Pension” (“TAP”) by some marketers) for which Baldwins is now offering its documentation. This pension attracts the Pension RBL while allowing considerable advantages and opportunities in financial planning and estate planning. Even though – by contrast to an ordinary allocated pension – the calculation for this pension of the annual pension payment is fixed from the outset, the level of drawdown in a complementary allocated pension can be tailored to provide a sufficient level of retirement income. Both types of pension attract both the 15% tax rebate and the tax-exemption for the deductible component (member-financed undeducted contributions).

For more information, contact Joe Lederman on 9606 0022.

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