The Crest of the Commonwealth of Australia Treasury Portfolio Ministers
Picture of Mal Brough

Mal Brough

Minister for Revenue and Assistant Treasurer

18 July 2004 - 26 January 2006

Media Release of 27/09/2005

No.085

Tuesday September 27, 2005

OUTCOMES OF THE REVIEW OF PENSIONS IN SMALL SUPERANNUATION FUNDS

The Government today announced its response to the review of the provision of pensions by small funds.

The review was established to examine options for small funds to provide pensions to their members, while addressing the Government's taxation, social security, retirement income and prudential concerns.

"The Government's response aims to improve the choices available to all retirees, including those in small funds. It will give retirees greater flexibility in meeting their retirement income needs", the Minister for Revenue and Assistant Treasurer, Mal Brough, said.

The Government has decided to provide more flexibility to the market linked income stream (MLIS) by:

  • extending the term of the pension so that payments can continue until the member reaches age 100 (or until a person's spouse reaches age 100). Currently the term of the MLIS is based on the life expectancy of the member or their life expectancy as if the member was five years younger. (A longer term is possible if the pension is a 'reversionary' pension.)
  • allowing annual MLIS payments to vary between plus or minus 10 per cent.

These changes will apply to new pensions commencing from 1 January 2006.

The Government will also update the allocated pension drawdown factors in line with current life expectancy. The changes will apply to new pensions commencing from 1 January 2006. This will better enable retirees to draw down their capital over their whole retirement.

"The enhanced market linked and allocated products will help manage longevity risks and provide more stable income", Mr Brough said.

As announced by the Government in June 2005, people who were members of a small fund on 11 May 2004, and who retire on or after age 55, or reach age 65, prior to 1 January 2006, still can commence a defined benefit pension. The member must become entitled to the pension prior to 1 January 2006 with payments commencing within 12 months of the entitlement date.

The Government would like to thank all parties for their efforts in providing submissions to the review.

Media contact: Carlie Hogan - (02) 6277 7360