Retirement Income Stream Products


A Comparison Account Based (Flexible) Income Streams Defined Benefit Superannuation Pensions Non Account Based Income Streams.

Introduction


When choosing an investment which will provide a regular income stream it is important to select the one most suitable. There may be other considerations in addition to those comparisons made overleaf such as those listed below.

Other Considerations


  • The amount that can be held in tax free retirement income streams is subject to the member’s available Transfer Balance Cap. From 1 July 2017 an individual’s transfer balance cap is $1.6M
  • Fees and charges vary among products. It should be determined whether the product offers good value
  • Check carefully if there are any penalties or potential capital losses associated with terminating the investment or making withdrawals (commutations)
  • All investments have risk. If there is the ability to choose the underlying assets of the investment make sure all associated risks are considered
  • It may be possible to structure the income stream to access income without volatility and manage risk

Taxation


Income payments may be assessable for income tax.

A deductable amount, representing the return of capital, may be available reducing the assessable income. For people between ages 55 and 60 years, where superannuation is used to purchase the income stream, the deductable amount is determined by the proportion of the tax exempt component producing the income stream. A tax offset of 15% may also be available based on taxable income.

For people aged over 60 years income from a funded (taxed) superannuation source is exempt from tax.

Government Income Support


The treatment of Income Stream products under the Income and Assets Tests is dependent on the characteristics specified in the contract.

All income stream products purchased since 20 September 2007 are fully assessable under the Assets Test. Certain income streams purchased prior to 20 September 2007 may have concessional treatment under the Assets Test.

The treatment of income streams for income test purposes can vary.

For further information on this refer to Financial Information Desk factsheets 'Account Based Income Streams' and 'Introducing Immediate Annuities' below.

Comparison of Income Stream Products


The chart below is intended as a guide only and covers the most commonly asked questions. 

For further information refer to Financial Information Desk factsheets 'Account Based Income Streams' and 'Introducing Immediate Annuities' above.

Account Based Income Streams (ABIS)

Non Account Based Income Streams

Account Based/Allocated Pensions (flexible) Transition to Retirement Income Streams Defined Benefit Super Pensions Lifetime Pensions & Annuities Life Expectancy Pensions & Annuities
How secure is my Capital? Depends on investment options chosen Depends on investment options chosen High (unless the trust deed is altered) High High
Can I withdraw lump sums at any time? Yes No Depends on fund rules No No
Can I choose the level of income I receive? Yes – as long as age based minimum taken Yes – between age based minimum & maximum 10% No No No
Is my income guaranteed? Only until money in the account runs out Only until money in the account runs out Yes (unless the trust deed is altered by paying institution Yes By paying institution Yes By paying institution
Must I use superannuation money? Yes Yes Yes Can be either super or non-superannuation Can be either super or non-superannuation
When must payments commence? By 30 June in the financial year of purchase. May be deferred if purchased after 1 June By 30 June in the financial year of purchase. May be deferred if purchased after 1 June Depends on fund rules By at least the first anniversary of purchase By at least the first anniversary of purchase
Can there be tax benefits? Yes Yes Yes Yes Yes
Is it counted as an asset for GIS? Yes Yes Depends on fund compliance with exemption characteristics Depends when purchased (see notes below) Depends when purchased (see notes below)
Is it subject to the income test for GIS? Yes. Special rules can apply Yes. Special rules can apply Yes. Special rules can apply (see notes below) Yes. Special rules can apply Yes. Special rules can apply
How are death benefits treated? Can continue to spouse, or to a dependant for a limited time, or as a lump sum. Non-dependants can only receive as a lump sum Can continue to spouse, or to a dependant for a limited time, or as a lump sum. Non-dependants can only receive as a lump sum Portion continues to spouse or to a dependant for a limited time. Superannuation – fund regulations apply. Non-super – income to nominated reversionary. Lump sum available in guarantee period Superannuation – fund regulations apply. Non-super – income to a nominated reversionary or estate. Lump sum payable


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