Mandatory withdrawals and super
Question:
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I am intrigued by the mandatory withdrawals from super increasing as I get older.
As a part pensioner this means that the regulation is simply pushing me more quickly to when I will be receiving a full pension and thus being more reliant on government support.
Can you explain?
Answer:
The purpose of super is to provide you with a retirement income, so you won't be reliant on welfare. Once your fund starts to pay you a pension, it becomes a tax-free fund while you are drawing a tax-free pension. No government wants to see retirees hold money in a tax-free environment indefinitely which is why mandatory drawings are required and which is why they increase with age.
All financial investments, including superannuation are assessed once you reach pensionable age.
Long time for partner to receive a reversionary pension
I ask about reversionary pensions. If the deceased is over the age of 60 and the beneficiary is under the age of 60, I believe the income stream will flow to the beneficiary as per the age of the deceased.
One of the advantages of a reversionary pension is that the benefits should flow quickly. But I recently approached my super fund (an industry fund), and was told that once the correct paperwork has been submitted (death certificate, identification etc) it would still take two months for my partner to receive any money.
This seems a long time - Is this normal?
Answer:
Superannuation Meg Heffron expert says the age of the deceased and beneficiary is highly relevant for tax but shouldn't affect the speed with which the pension continues.
If either the beneficiary or deceased are over 60, the pension is tax free. If they're both under 60, it won't become tax free until the beneficiary is 60.
A reversionary pension should make the process quicker but exactly how quick will depend on the processes of the paying fund.
A death certificate and proof of identity of the beneficiary is needed because they need to confirm a few things: the original pensioner has definitely died, the person now asking for the money is definitely the person named on the reversionary pension application and finally they are eligible to receive the money (not everyone is allowed to have a deceased person's super as a pension).
Two months does seem like a long time to make that happen if all the information is provided promptly.
Perhaps that time frame includes a buffer for administrative delays?
- Noel Whittaker is the author of Retirement Made Simple and numerous other books on personal finance. Email your questions to edit@thesenior.com.au
- This advice is general in nature and readers should seek their own professional advice before making any financial decisions.