Older pensioners with monies caught in non-commutable legacy pensions are treated far more harshly and inequitably compared to a person with the same amount of money in an Account Based Pension.
Adding 50% of drawings (which often can’t be modified) into personal assessable income is often a lot more tax than the loss of the exemption to a 15% of investment earnings tax.
It’s also sloppy legislation. Valuing the benefit as 16 times the lifetime income or remaining term doesn’t equate to the asset backing. It’s illogical and inequitable. The market-linked pension could so easily have been valued at the account balance upon which payments are based. It is almost as if the attitude was that there are not many of these people and anyway, they are rich.
This group will also be pushed into the PAYG deduction system and have more administration.
Whilst one is constrained by what is possible, the roughness of the approach does allow NetActuary to analyse the scope to provide some mitigation. Lifetime 1.06(2) pensions and 1.06(7) life expectancy pensions can be converted to 1.06(8) market linked pensions. Monies can be left in 15% tax reserves.
Subject to estate planning objectives, changing to different market-linked durations can be explored. Compliance and capital gains tax relief issues must be considered.
If you would like a report, please send me a copy of the last set of accounts, member statements and the actuarial report. The cost is $550 inclusive of GST.