Note: Draft legislation is now available on the relief outlined in this article. You can find more recent information on this issue, including changes to the relief offered to SMSFs, by reading DIY super: Age Pension relief for SMSF lifetime pensions.
Defined benefit pensions, such as lifetime pensions, are not eligible for the temporary relief on pension payments for the 2008/2009 year (see article ‘Relief in hard times for retirees’). Certain lifetime pensions have received a reprieve however on repaying
Due to the dramatic falls in
Certain lifetime pensions (known as ‘complying
The major condition for maintaining this generous asset test exemption is obtaining an actuarial certificate of solvency each year confirming that the SMSF has a strong chance of having the capacity to pay the defined benefit each year for the expected life of the fund member.
Normally, if an SMSF fails this solvency requirement, the income stream is no longer exempt from the Age Pension assets test, plus the fund member would then have to repay up to five years of Age Pension entitlements.
Fortunately, the Government has shown some understanding in these tough times. If your lifetime pension fails the solvency test you won’t have to repay any Age Pension entitlements. You will however lose your exemption from the Age Pension asset test, unless you transfer your pension assets to a special pension product offered by financial organisations.
Hi Doug
Great questions but at this stage I suggest you contact Centrelink to check how the proposed rules will be implemented in your circumstances. At a later time, I will respond to these questions in a more general way in the comments section of this article.
Regards
Trish