Forman Financial Services

Take amounts exceeding the minimum as lump sum commutations

Where a member requires amounts from their account based pension in excess of the reduced minimums that apply in 2019-20, they should consider taking the additional amounts as lump sum commutations rather than pension payments.

This is because regular pension payments have no impact on a member’s transfer balance account, whereas lump sum commutations from a retirement phase income stream reduce the member’s balance in their transfer balance account.

In some cases, the reduction in a member’s transfer balance account may enable additional accumulation benefits to be transferred to the tax-free retirement phase, or a higher amount of deceased spouse’s death benefit to be received in the form of an income stream in the future.

Where a member wishes to receive amounts from their account based pension above the reduced minimum as lump sums, they will need to specifically request this prior to the withdrawal occurring (as withdrawal from pensions are pension payments by default). It is also not possible to re-classify a withdrawal that has already occurred.

The strategy of taking amounts above the reduced minimums as lump sums is not possible for TAPs, and not possible for TTR income streams unless there is UNP from which the withdrawal can be made (eg, if the client has met a full condition of release such as retirement)*.

* Where a TTR income stream is not yet in retirement phase, withdrawals from their income stream will not have any transfer balance cap implications as the TTR income stream will not yet be subject to the transfer balance cap.

SMSF can seem complex.  We have a special offer for general advice for $225.00.
Please click here for more information.
For more information on this subject feel free to get in touch with us click here
To receive free updates on relevant information click here
To read more about our specialised service offers for SMSF please click here