Reducing payments from pensions

Agnes is confused about what will happen if she reduces her payments from an account-based pension.

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Q. Agnes
The government has announced that pensioners can reduce the payments from account-based pensions. I am a 73-year-old single renter. Currently I receive a part Age Pension ($1012 per fortnight including supplements and rent assistance) based on the income I receive from my account-based pension ($1000 per month) and pensions from overseas (about $550 per month).

Should I reduce my account-based pension from five per cent to 2.5 per cent, will this result in an increase in the Age Pension payments from Centrelink, which is assessed on my income, OR will it result in living on a reduced income?

A. Your income test is assessed on deeming of the balance of your account-based income stream, not the amount that you draw down, so you will be living on a reduced income if you choose to reduce your payment.

For many retirees, the significant losses in financial markets as a result of the COVID-19 crisis are having a negative effect on the account balance of their superannuation pension or annuity.

To assist retirees, the government has reduced the minimum annual payment required for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities by 50 per cent in the 2019–20 and the 2020–21 financial years.

Superannuation and annuity providers calculate the minimum annual payment required at 1 July each year, based on the account balance of the member or annuitant. The 50 per cent reduction will apply to the calculated minimum annual payment.

Will you be drawing down less from your super this financial year to protect your balance through the coronavirus pandemic?

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Disclaimer: All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a Centrelink Financial Information Services officer, financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.

Written by Ben

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