Note: This article explains the superannuation minimum pension payment factors for the 2015/2016 and 2014/2015 years, and also for the 2013/2014, 2012/2013, 2011/2012 and 2010/2011 years. Alternatively, if you are looking for the latest Age Pension rates, click here.
When you start a superannuation account-based pension you must withdraw a minimum amount each year, based on your age and size of your account balance, to enable the earnings on your super pension account to be tax-exempt.
Due to horrendous investment market performance in recent years, the Federal Government reduced the minimum pension amount required to be withdrawn from pension accounts for the 2012/2013, 2011/2012, 2010/2011, 2009/2010 and 2008/2009 financial years.
From the 2013/2014 financial year onwards, the minimum pension payment factors return to normal (see table below).
Background: The reduction in minimum annual pension payments in earlier years was designed to help mitigate drawing down on already savaged retirement saving balances, and to minimise forced asset sales to comply with the pension payment rules. (Unfortunately for some retirees with smaller account balances, they had no choice but to withdraw at least the minimum pension amounts in order to meet living expenses, which means the pension payment relief in previous financial years was of no benefit to this category of retiree.)
Note: For the 2008/2009, 2009/2010 and 2010/2011 financial years, the minimum pension payment amount was half of the usual amount (see table below). For the 2011/2012 and 2012/2013 financial years, the federal government deemed that you only had to withdraw 75% of the legislated minimum pension payments (see table below). For example, for the 2012/2013 year, an individual aged 65 had to withdraw 3.75% of his account balance for the year, rather than 5% under the regular minimum pension payment rules.
The minimum pension payment factors apply to account-based pensions and annuities (payable since 1 July 2007); and allocated pensions and annuities.
Note: If you have a market-linked income stream, the calculation for the annual minimum pension payments is different. For the calculation method for market-linked income streams, refer to SIS Regulations, Schedule 6, or chat to your accountant or adviser. Click here to access SIS Regulations Schedule 6.
Minimum annual pension payments (for account-based pensions)
|Minimum annual pension payments (for account-based pensions)|
|Back to normal||Temporary relief|
|2015/2016, 2014/2015, & 2013/2014 years||2012/2013 and 2011/2012 years*||2010/2011, 2009/2010 and 2008/2009 years*|
|Age||Percentage factors (PF)||Full PF||75% of PF||50% of PF|
|95 or older||14%||14%||10.5%||7%|
*For the 2012/2013 year and for the 2011/2012 year, the annual minimum pension payment factors were 75% of the usual factors. For the 2010/2011, 2009/2010, and for the 2008/2009 years, the annual minimum payment factors were 50% of the usual factors.
Note: Amount calculated on 1 July each year, unless first year of account-based income stream, and then pro-rated from commencement day. Minimum amount to be rounded to nearest $10.
Source: Adapted from Schedule 7, Superannuation Industry (Supervision) Regulations 1994 and Federal Government news releases dated 18 February 2009, and 12 May 2009, and 30 June 2010, and 29 November 2011. Figures for 2011/2012 year and 2012/2013 year calculated by Trish Power.
Background: If you have an account-based pension (or the older-style allocated pension) you must pay a minimum amount at least annually. If you’re aged 65 to 74, the usual minimum pension payment for an account-based pension is 5% of your pension’s account balance. For example, Robert is 68 and has $500,000 in his pension account. His minimum pension payment is $25,000 under the regular pension payment rules.