The commencement date for regulations implementing several pension and annuity changes will be deferred by three months to October 1 allow reasonable time for the finance industry to fully comply, the Minister for Revenue and Assistant Treasurer Senator Helen Coonan announced today.
Senator Coonan said the regulations, first announced on 1 July 2002, will improve the integrity of the standards for the payment of income streams.
"The regulations address two areas of concern. The first aspect requires minimum amounts to be paid as income when income streams are commuted. Rules allowing the deferral of the first income payment from an allocated pension or annuity in the last quarter of a financial year will also be tightened," Senator Coonan said.
"The second aspect clarifies the operation of the rule that allows `complying' income streams to be commuted within six months of their commencement to prevent pension account holders from commuting their pension outside of the six-month window."
The regulations were to take effect from 1 July 2003 but will now be gazetted early next month to take effect from 1 October 2003, thereby allowing time for system changes to allow compliance.
"Part of the rationale for providing additional concessions for people purchasing complying pensions, such as access to a higher reasonable benefit limit, is that they are locked into receiving a lifetime or life expectancy product," Senator Coonan said.
"Obviously it is less than ideal if people are able to commute their pension, thus retaining access to their capital and still enjoying concessions designed to encourage the purchase of long term income streams."
Suggestions made in consultations by industry representatives have been considered in detail in finalising the regulations. The deferral of the start date is a key outcome from the consultations and will assist industry in implementing the new rules.
The short deferral will not impact significantly on the effectiveness of the regulations as they are aimed primarily at strategies involving repeated stopping and recommencing of income streams.
"I am pleased that consultation with industry representatives has assisted in ensuring that the regulations are robust and workable," Senator Coonan said.