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What is a Pension?
A pension is merely an income stream. Generally a pension is created when an amount of capital is set aside (the purchase price of the pension) and pension payments are made from that capital and its earnings. There are currently two types of pensions that may be started from a self managed superannuation fund. A fund member may receive one pension or a combination of pensions depending on their asset base and income requirements. Pensions that can be paid from a SMSF are: Account Based Pensions and Transition to Retirement Income Stream Grandfathered Pensions:
Allocated Pensions, Term Allocated Pensions also called Growth or
Market Linked, Non Commutable Allocated for Transition to Retirement
pensions. |
Preservation Age
A member's benefits in a fund will be classified as one or more of the following :
- Preserved benefits (PB's)
- Restricted non-preserved benefits (RNPBs)
- Unrestricted non-preserved benefits (UNPB's)
It is therefore useful to explain these terms :
Preserved benefits — generally, these are benefits which must be retained in the fund until the member’s ‘retirement’ on or after reaching the member’s ‘preservation age’. If a person aged under 55 years of age terminates employment, their preserved benefits cannot be paid to them.
Restricted non-preserved benefits — generally, this is a benefit which, although not preserved, cannot be cashed until the member satisfies a condition of release (for example, termination of employment in an employer superannuation scheme).
Unrestricted non-preserved benefits — generally, this is a benefit which does not require the fulfillment of a condition of release, and may be paid upon demand by the member. An example of this type of benefit is one where the member has previously satisfied a condition of release and decided to keep the monies in the superannuation fund.
A persons preservation age depends on their date of birth, as set out in the following table :
| Date of Birth | Preservation
Age |
| Before 1 July 1960 | 55 |
| 1 July 1960 - 30 June 1961 | 56 |
| 1 July 1961 - 30 June 1962 | 57 |
| 1 July 1962 - 30 June 1963 | 58 |
| 1 July 1963 - 30 June 1964 | 59 |
| After 30 June 1964 | 60 |
On reaching age 65 there is no requirement to start a pension. A member may leave their money in accumulation stage as long as they want however there may be tax advantages to starting a pension and this should be considered.
