Early in July each year, super funds send a letter to their account-based pension members confirming the amount of pension they will receive during the following 12 months.
Historically, you may have ignored this letter as the default position was to do nothing – that is, the super fund would pay the same amount as was paid in the previous 12 months, unless you responded to request a different amount.
The only time you may be forced to change the amount of pension received is if your nominated amount is less than the legislated minimum (i.e. 5% of the 1 July account balance for pensioners aged between 65 and 74, 6% for pensioners between 74 and 79).
However, due to investment market volatility associated with COVID-19, the Federal Government has intruded a temporary change to reduce the legislated minimum amount by 50%. What this means in practice is that if you elected to receive the 6% minimum (based on your age), you may now opt to receive 3%, or any percentage between 3% and 6%.
While there have been media reports of this measure detrimentally impacting on the cash-flow of some retirees (Your pension payment could halve in July because of COVID-19 changes to superannuation) it is important to note that any change to the amount you receive is voluntary. You can request no change if you wish to do so.
Your super fund will still post the letter in July asking you to confirm the amount of pension you wish to receive in the next 12 months.
If you have selected the minimum amount in the past, for the 2020/21 Financial Year, some super funds have announced that their default position will be to reduce the payment temporarily to the 50% amount. So, if you previously received 6%, the percentage for 2021/22 will reduce to 3%
If you would like to maintain the previous “full” minimum amount, all you need to do is inform your super fund of this, which can be done via their website or by returning the prepopulated form which comes with the letter.
If you would like to assess or reassess your pension payment or investment strategy, contact Advice SA for an appointment.
Mark Bastiaans is an Authorised Representative #296627 of Guideway Financial Services Pty Ltd ABN 46 156 498 538 AFSL 420367.
The information provided above contains general advice that does not take into account your financial situation, specific needs or objectives and is not intended to be personal financial advice and should not be relied upon without written advice from Guideway Financial Services Pty Ltd.