20 December 2005

Regulations to Implement Outcomes of Review of Pensions in Small Superannuation Funds

Retirees will have access to more flexible income stream choices and be able to better manage their financial needs under new superannuation rules to begin on 1 January, 2006.

Assistant Treasurer Mal Brough today announced regulations have been made to implement the Howard Government's response to the review of pensions in small superannuation funds.

"These changes aim to improve income stream choices for all retirees, including those in small funds, by providing more flexible draw down rules for popular pension and annuity products," Mr Brough said.

The regulations update the allocated pension and annuity draw down factors in line with current life expectancy. The new factors will apply to allocated pensions and annuities with a commencement day on or after 1 January 2006. Transitional provisions enable income stream providers to use the old factors for payments made until 30 June 2006.

The regulations also extend the maximum term of a market linked income stream, so that payments may continue until the recipient reaches age 100 (or until the recipient's spouse reaches age 100). The change will apply to market linked pensions with a commencement day on or after 1 January 2006. Similarly, the regulations extend the maximum term for other life expectancy income stream products with a commencement day on or after 1 January 2006.

In addition, the regulations allow annual payments from market linked income streams to vary between plus or minus 10 per cent of the payments calculated under the usual payment rules. This change will apply to market linked income streams regardless of their commencement day.

"The new rules will allow retirees to better manage their income needs and increase certainty that they will not outlive their retirement savings," Mr Brough said.

The regulations were finalised following public consultation on draft regulations during November 2005. This was in addition to the detailed consultation that was undertaken during the review process. The Superannuation Industry (Supervision) Amendment Regulations 2005 (No.7) and the Retirement Savings Accounts Amendment Regulations 2005 (No.4) are available on the Federal Register of Legislative Instruments website at www.frli.gov.au.