Changes to pensions could halve payments from 1 July

Changes to superannuation pension are set to start from 1 July.

australian dollar with graph, home budget laptop and calculator

A government change to superannuation pension payments announced in March could catch out many older Australians when it takes effect on 1 July.

In response to the COVID-19 pandemic, the government announced a temporary 50 per cent reduction in the superannuation minimum drawdown requirement for account-based pensions and similar products for 2019-20 and 2020-21.

What this means is that for some retirees receiving the minimum payment amount from their income account at 30 June this year, the 50 per cent reduction will be automatically applied and their income payments will be reduced unless they take action before their first payment date in July.

Only some super funds are making this change automatically, however, as others are only making the change when they are requested to do so by pension recipients.

The change will not have an effect on those retirees who are receiving an amount more than the minimum drawdown, although there is an option to reduce your payments if you want to try to preserve your balance during the tough economic times.

The minimum payment amount from account-based pension is a percentage of the income account balance at the start of the financial year, or the date your income account started.

The government announced the change in March to provide retirees with more flexibility while markets were volatile.

The change allows retirees to choose to leave more of their retirement savings invested over a longer period, which allows them to keep more funds in their account as markets recover from the pandemic. This measure was also put in place during the global financial crisis.

If you want to make changes to your regular account-based pension payments, you can choose to receive a:

- Specified amount – Set payments at a specified amount above the temporary minimum. This could help provide certainty for budgeting. 

- Reduced minimum – Apply to reduce your income account payments to the new minimum payment amounts. If you’re already receiving minimum payment amounts, the 50 per cent reduction will be automatically applied for the 2020-21 financial year by some super funds.

- Non-reduced minimum – Continue to receive the payments at the rate you have been receiving them prior to the change taking effect. If you are receiving the minimum pension payment this change needs to be made before the first July payment for it to apply for the 2020-21 financial year with some super funds.

Were you aware of the coming change to account-based pension payments? Are you changing your payment or will you accept the 50 per cent reduction in payments?

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    COMMENTS

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    19th Jun 2020
    3:55pm
    They have only halved the minimum amount so you can take out less if you want. No one is going to lose anything.
    Mark
    19th Jun 2020
    4:09pm
    Yes. It is a very misleading headline designed to get your attention.
    Returned Serviceman..
    19th Jun 2020
    4:53pm
    Yes Mark you could call it fake news.
    older&wiser
    19th Jun 2020
    4:53pm
    Agree, another click bait headline, becoming all too familiar. My super will only lower the minimum amount of you specifically request this change, it is not a mandatory option, it is a choice.
    Sundays
    19th Jun 2020
    6:44pm
    Definitely Fake news. Our Super Fund has kept us fully informed. The Government introduced the change because it is what many retirees have wanted for a long time
    arbee
    20th Jun 2020
    12:04am
    As usual yet another article by this left wing rag to try to make the government look bad. Can you imagine how it may have read if labour were in power, maybe something like this, "Our generous labour government wishing to keep the best interests of self funded retirees at heart very generously halved the minimum draw down on allocated pensions earlier this year. Please make sure your fund does the right thing and doesn't reduce your payments from the 1st July, and don't forget to vote for chairman Mao (Albo) in the next election".
    Horace Cope
    19th Jun 2020
    4:22pm
    "Were you aware of the coming change to account-based pension payments? Are you changing your payment or will you accept the 50 per cent reduction in payments?"

    Yes, we are aware of the allowable reduction and our financial position allows us to take advantage of it which has the effect of increasing our super balance because there is less coming out. Yes we will be continuing with the allowable reduction.

    In saying that, I'm disappointed, although not surprised, that firstly there is a misleading headline which could potentially scare pensioners and secondly doesn't address the ability to change the drawdown decision at any time. The article suggests that time is running out, hurry, hurry, hurry, before the end of June or you will never be able to do anything about the change. Actually, my reading of the change is that the default position is that a member has to opt in to make the reduction, that it's not a mandatory reduction.
    Gra
    19th Jun 2020
    4:50pm
    It would be really nice to read a FACTUAL article here once in a while instead of the dramatized garbage we get fed. Payments won't change unless the recipient asks for changes to be made to their allocated pension. There is nothing automatic about it.
    BillW41
    19th Jun 2020
    4:55pm
    I agree with the others. An unnecessary scary headline. The reduction, which I opted for, is voluntary and I thought was perfectly clear. Please don't confuse those who may not follow Govt speak or journalise.
    Nomad1946
    19th Jun 2020
    5:20pm
    Your headline is somewhat Inflammatory ... maybe you should stop and think before you set one. The Pension, as most interpret, IS NOT going to decrease !!! As we all know the halving of the required annual drawdown from Superannuation will revert to what it was before the Covid-19 reduction.
    I just wish you'd cease the bullshit wording of your article headline and be bloody factual and honest!!!!
    john
    20th Jun 2020
    12:40pm
    Your life choices is seeming more and more like a left wing panic reporter , and I think the reporting is pre planned propaganda, but I got rid of one news media off the little cyber space I have and now find a similarity to YLC to that that I removed. Subtle but definitely a leaning reporter, lift your game Your Life Choices!

    19th Jun 2020
    5:29pm
    I am with Telstra super and received advice from them a while ago - this article is misleading and as "retired well" said - no one is going to lose anything.
    Mondo
    19th Jun 2020
    6:07pm
    Apart from the confusion the heading of this article adds, the letters sent from some super funds don't help either making it very unclear whether they are applying the reduction automatically or not. The best thing to do is go online and make it clear what you want done with YOUR money. I believe too that to give your accumulated funds an even better chance of recovering its possible to have 2020/21 payments delayed until the last six months of that financial year.
    justme
    19th Jun 2020
    6:11pm
    The quality of some article appearing lately is very disappointing.
    This discounts the value of receiving their emails.
    When looking for genuine retirement oriented articles, we now have to wade through sensationalist misleading wastes of our time and patience.
    Sad more than angry.
    Locksy
    19th Jun 2020
    6:32pm
    Fake News
    LeonYLC
    19th Jun 2020
    7:22pm
    Hi YLC members,
    We value your feedback, thank you for your input and have taken your opinions on board.
    Please be assured that the team will endeavour to be better and deliver the free, quality content you are used to receiving.
    Cheers,
    Leon
    arbee
    20th Jun 2020
    12:09am
    Well if you ever do, then it will certainly be a first. Such a shame that it has taken such an outburst of negative opinions to your posts for you to finally respond this way. In the future if you cannot be more balanced then at least re-name your publication "Your left wing life choices.
    Viking
    20th Jun 2020
    9:21am
    arbee, why do you say that sensational or misleading headings or claims equate to left wing? Are you suggesting the sensationalist and inaccurate headlines in print media like the Telegraph and Australian are left.wing? Do you say that Trump's and Boris Johnson's crazy outbursts are left wing? What about Morrison's half truths and lies eg his latest; Australia never had a slave history or Dutton's dishonest fear campaigns, are they all left wing?

    If your complaint is about accuracy, where do you stand?
    NK
    19th Jun 2020
    8:13pm
    The heading maybe a bit misleading but on closer reading it does say super pension payments and the information is accurate. My fund notified me of the upcoming change. I’m sure conditions may vary from fund to fund but for me it would be an automatic change unless I opt out and state a desired alternative- as explained in the article. So I have to opt out of the cut not opt in or my monthly payment will automatically be halved. Considering it is my sole income it is not insignificant for me to have this information well explained. Thankyou
    KSS
    19th Jun 2020
    8:32pm
    Another misleading sensationalist headline.
    No one will lose anything. The government has reduced the minimum withdrawal amount thats all, they are not taking anything away. If you want to withdraw the same amount you can.
    thommo
    19th Jun 2020
    8:41pm
    You don't know what you're talking about kss.
    Hammer
    19th Jun 2020
    9:30pm
    thommo - do you live in the real would? what KSS has said is correct. Please check your facts before making a comment!
    Greg
    19th Jun 2020
    11:14pm
    thommo - sounds like YOU don't know what you're talking about. KSS is correct.
    Maggs
    20th Jun 2020
    9:39am
    You're absolutely correct KSS. So long as your drawdown amount is 2% or higher. You can take whatever you like - it's your money.
    thommo
    19th Jun 2020
    8:39pm
    The LNP GOVT CLAIMS THEY ARE FOR SMALL MINIMALIST GOVT, but that is a load of bullshit. Witness the cashless debit card for welfare recipients, and new this intervention in super pensions, which is micromanagement of retirees income.
    Morrison and his govt are a bunch of moronic mongrels and the sooner they are turfed from office the better and good riddance.
    Viking
    19th Jun 2020
    11:32pm
    thommo, what are you on about? What the government has done makes good sense under the circumstances, it gives retirees greater choice over their own money. You can still draw down the same percentage as before but it will be from a reduced base because of the effect the virus has had on shares etc. KSS is right.
    David
    19th Jun 2020
    9:47pm
    Australian Super is making the change to 2% automatically for those that have previously chosen to draw down the minimum rate of 4%. If you don't want this to happen, they advised me that you will need to contact them from 1/7/2020 to get it changed back.
    I think it would have been better if they had kept your superannuation pension as it is and left it to members to request a reduction, rather than assuming that this is what the members wanted.
    Maggs
    20th Jun 2020
    9:43am
    Yes I agree. My drawdown is a set monetary amount which, as it's above the 2% minimum it shouldn't be changed. At least that's what they told me but knowing these Super funds, you get a different person on the phone and a different answer! I haven't received any notification at all from HESTA.
    Rae
    24th Jun 2020
    9:49am
    The Financial Industry always does what is best for their fees and charges. They know the balances will drop if the 4% is maintained and their fees with it.

    By dropping the balances many may become eligible for part pensions. That might serve them well as the concessions can save thousands in full costs alone. This is a time for financial advice if you can find a decent independent adviser.
    etc1
    19th Jun 2020
    9:53pm
    I've decided to unsubscribe to this so called retirees newsletter. It has reverted to scare tactics to sell more advertising, for obvious profits. Also, Most of the legitimate information is third hand.
    eggles01
    19th Jun 2020
    11:03pm
    put this mob and the guardian into a bag and you will have a bag full of doggy doo
    Maggs
    20th Jun 2020
    9:26am
    hahahaha
    SuziJ
    20th Jun 2020
    12:10am
    Won't affect me, as I don't have any Super :)
    Maggs
    20th Jun 2020
    9:24am
    What a ridiculous headline! Absolute rubbish. Nothing's slashed unless you want it to be. This online magazine loves to make everything worse that it is.
    Marjie
    22nd Jun 2020
    1:45pm
    I disagree, my income stream has been halved by my fund without any input from me.
    Juris
    20th Jun 2020
    10:23am
    YLC are losing creditability very quickly. Stooping to what can be described as "fake news" at the best. Good way to scare many old vulnerable pensioners for the sake of a quarter right headline. It's time to act responsibly and nearly time to cancel my subscription.
    Kiwinoz
    20th Jun 2020
    10:42am
    Folks Like TV and other forms of entertainment, if you do not like something then it is your option to turn if off, instead of complaining about the material you are seeing. Last I checked we still live in a free world, albeit not as free as when I was a younger person.
    Maggs
    22nd Jun 2020
    9:35am
    Yes I do agree with you if what you mean is that we can all decide whether or not we read/subscribe to this publication. However, YLC isn't totally bad and has some enjoyable reading. It doesn't hurt to let them know that they need to stop with the fear mongering and untrue headlines. If they don't take any notice then they deserve to lose subscribers.
    john
    20th Jun 2020
    12:36pm
    Mark you are totally correct, this is a very bad tactic it appears for YLC to be at all the time with provocative and frightening headlines, is this YLC actually attached to the left wing TND, BECAUSE THERE ARE LOTS OF THINGS ON HERE THAT MAKE IT SOUND AS IF THE GOVERNMENT IS TRYING TO KILL US OFF. AND THE GOVERNMENT HAS JUST PUT US INTO HOCK FOR GOD KNOWS HOW LONG , BUT IT HAD NO CHOICE!
    Now a news report in YLC saying that retirees could lose half their allocated income , if you don't understand then YLC is irresponsible to the tune of a political leaning????
    john
    20th Jun 2020
    12:36pm
    Mark you are totally correct, this is a very bad tactic it appears for YLC to be at all the time with provocative and frightening headlines, is this YLC actually attached to the left wing TND, BECAUSE THERE ARE LOTS OF THINGS ON HERE THAT MAKE IT SOUND AS IF THE GOVERNMENT IS TRYING TO KILL US OFF. AND THE GOVERNMENT HAS JUST PUT US INTO HOCK FOR GOD KNOWS HOW LONG , BUT IT HAD NO CHOICE!
    Now a news report in YLC saying that retirees could lose half their allocated income , if you don't understand then YLC is irresponsible to the tune of a political leaning????
    Marjie
    21st Jun 2020
    4:43pm
    I was horrified to get a letter from my super fund this week telling me my income stream would reduce by 50% from the July payment. I understand that some people might be happy with this option but I AM NOT. I think this should be an "opt in" choice not an automatic change by the fund and I have let them know in no uncertain terms. I am quite prepared to reduce my income slightly but absolutely not by 50%. I know that some funds are giving retirees the option which I think is the way to go.
    David
    21st Jun 2020
    7:24pm
    I agree Marjie.
    Are you with Australian Super? I am and they are doing the same.
    If you are with Australian Super, they told me to contact them no earlier than 1/7 to get it adjusted back. I don't know why you can't request them to adjust it back now.
    It doesn't bother me that my income stream is dropping by half but there are some that will be impacted. They should never have made assumptions like that. It will be a pain for those that can't afford a reduction in their income stream to have to apply to get their income stream back to where they were before and it could result in a delay in getting the amounts readjusted.
    Good luck and I hope that they reverse it quickly for you.
    Viking
    21st Jun 2020
    11:03pm
    Marie, You should try going online now to your account to make the adjustment you need. One of my super funds is AusSuper and I was informed and adjusted around a month ago. They do have cut off dates by which they can adjust for the next payment and that is all you may be up against. Remember too that AusSuper thinks and behaves as if your money is their's. Talk to them by phone if need be to accelerate the change you need, it's your money.
    Viking
    22nd Jun 2020
    9:36am
    Marjie, my apologies for dropping the "j" on your name, late at night.
    Marjie
    22nd Jun 2020
    10:30am
    Thanks to those who responded to my comments, I have in fact been online and changed my income stream percentage but not by 50%. I still however think it is the WRONG WAY to go about this situation. I am with CARE and have been happy until now!! I believe we SHOULD have been given the option and not automatically have our income stream halved. NOT HAPPY NAN!!
    Viking
    22nd Jun 2020
    1:40pm
    Marjie, I think you may find that there could have been a government requirement with the best of intentions to automatically apply the change unless overridden by the client.
    Marjie
    22nd Jun 2020
    1:44pm
    Hi Viking, you may be correct however this doesn't seem to have happened in my partner's case so I am a bit dubious. No doubt my fund will contact me in due course in response to my feedback!!!! If indeed that was the case why did they not contact me back in March when the scheme was first implemented..............
    Rae
    24th Jun 2020
    9:57am
    Fees and charges. The more held in the account the higher the fees in many funds. Not sure about yours. Also having to sell into falling markets doesn't help.

    I suspect this is going to get worse. Consider your options as an aged pension may become an option as accounts fall and income contracts.


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