Government changes affecting retirees

On 1 May 2020, the Federal Government made changes to deeming rates and pension drawdown limits as part of its economic response to the coronavirus pandemic. We would like to remind you of what’s changed so you can ensure your First Super pension account is set up to meet your current needs.  

Lower deeming rates for income test 

The Government lowered the deeming rates for the Age Pension income test to 2.25 per cent (upper deeming rate) and 0.25 per cent (lower deeming rate). 

The deeming rate is used to work out the income from your financial assets. The changes were made to reflect the impact of historically low interest rates on income from savings. 

Services Australia (Centrelink) will apply these rates when assessing or reviewing your Age Pension eligibility. Please contact your local Centrelink office or its helpline for more information. 

Temporary reduction to minimum payment amounts 

The Government also temporarily halved the minimum drawdown requirements for pension accounts (i.e. the minimum amount of account balance that you must withdraw each financial year).  

This change will remain in place for the 2020/21 financial year. 

It gives retirees the option of drawing down less from their super pension account
and keeping more capital invested during this period of market volatility and lower investment returns.

For example, a retiree could now only withdraw 2.5 per cent of their account balance for the 2020/21 financial year compared to the previous minimum of 5 per cent. 

Of course, your income needs may change, so please contact our Member Services Team if you wish to revise the drawdown amount from your First Super pension account at any time. Alternatively, complete the Pension Variation Form with your new preferred drawdown rate and return it to us. 

Need help? 

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 Member and Employer Services 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) or review your cash flow needs for no additional fee to our members*. 

*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.