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Government changes affecting retirees

July 8th, 2020

We would like to remind you of some Government changes around the age pension and superannuation drawdown.

As part of the Federal Government’s economic response to the COVID-19 crisis, announced on Sunday 22 March, it stated changes to how pension income will be assessed to reflect the current interest rate environment and the impact of that on income from savings.

From 1 May 2020 the upper deeming rate is 2.25 per cent and the lower deeming rate is 0.25 per cent. Services Australia (Centrelink) will apply these changes when assessing or reviewing your age pension eligibility. Please contact your local Centrelink office or its helpline for more information.

The Federal Government has also temporarily halved the superannuation minimum drawdown requirements for pension accounts (i.e. the minimum amount of account balance that you must withdraw each year) for the 2020/21 financial year. This is to allow retirees to reduce the amount they are drawing from their super pension account during the current period of investment market volatility.

This measure will be most applicable to retirees who opted to draw the minimum percentage allowed each year. For example, subject to income needs, a retiree can now elect to receive 2.5% for the 2020/21 financial year as opposed to 5% (see the table below for more information about the minimum percentage).

Please contact our Member Services Team if you wish to reduce your drawdown amount from your First Super pension account based on the revised minimum percentage.

Remember, if you are unsure about the best course of action for your circumstances or you wish to review how your First Super pension funds are invested, speak to your local coordinator or the Member Services Team, who can explain the investment options available to you. Alternatively, our Financial Advice Team can provide a written investment only recommendation (personal advice) for no additional fee to our members*.

Table: Changes to the minimum drawdown rates from 1 May 2020

Age Previous minimum drawdown rates Rates reduced by 50% for the 2019/20 and 2020/21 financial years
Under 65 4% 2%
65-74 5% 2.5%
75-79 6% 3%
80-84 7% 3.5%
85-89 9% 4.5%
90-94 11% 5.5%
95 or more 14% 7%

*Disclaimer: Financial advice is provided by First Super Financial Planners, who are authorised representatives of Industry Fund Services Limited (ABN 54 007 016 195, AFSL 232514) and may be free of charge to you.