Pension Fund Advantages

DIY Pension Fund Advantages Include:

• Regular income stream. In the case of allocated pensions, this is flexible as you can choose to draw yearly between a minimum and maximum figure, depending upon your requirements for the coming year. There is no maximum if over 60 unless still working and under 65.
• You choose how often your pension is paid to you each year.  It must be at least once per year which may suit you. However it can be weekly, fortnightly, monthly, quarterly, six monthly or yearly.
• No tax is payable on income or capital gains of your Pension Fund including for assets in the Super Fund that were purchased prior to commencement of the pension. Franking credit dividend rebates can mean tax refunds to the Fund each year.

• If the pension fund received in franked dividends during the year say $50,000 with franking credits of $21,428 the $21,428 is refunded in cash to the pension fund.
• Any payments from a super or pension fund (lump sum or pension) for a retired person over 60 or person of age pension age will not be taxable.
• Even if the person starts working again payments from the super/pension fund will not be taxable.
• Death with a Life Company Complying Pension means there will be no capital obtained by your estate from the life assurance company pension. A DIY Pension Fund can result in residuary assets from your DIY Pension Fund to your beneficiaries/relatives. Note: You cannot access your capital during the term of a complying pension.
• You have control of your investments and make your decisions for your investments. You can tailor an investment strategy specific to your needs.
• Centrelink Aged Pension benefits may be able to be obtained. Even a part age pension can give valuable other benefits. Also member accounts in the pension phase pay income to members which can be exempt income under Centrelink income tax.
• From 20 September 2007 all assets in new pension funds will have pension assets counted for Centrelink benefits.  Also from 20 September 2007 the Centrelink pension asset changes so that couples will be able to obtain some pensions with assets up to $818,000 included.
• In the case of a market linked pension you have your capital and income returned to you over the time period of the pension.
• Investment flexibility means you can have access to a large variety of financial products, which are not available via traditional retail funds.
• Commutations of capital from allocated pension can be made if required, but can have taxation consequences if under 60 or not retired and under age pension age. All of the capital can be drawn down from an allocated pension at any time so that there is complete access to capital.
• Can offer a reversionary pension on death, to spouse which means funds stay in the tax advantaged pension environment until the death of the remaining pensioner.
• Creation of non concessional personal contributions results in exempt components on death for non-dependants who would otherwise pay tax at 16.5%.
• The one fund can have several different facets at the same time so that there is no need to go to the expense of setting up separate funds. This can mean that one spouse can have commenced a pension and returned to work and superannuation contributions are again made into the fund. The other spouse is younger and only has superannuation money in the fund. However pension assets should preferably be strictly segregated from Superannuation fund assets to ensure capital gains are tax free to pension part of the fund.
• Non commutable allocated pension can now be commenced from age 55 while still working. These pensions can have an exempt portion and the balance is taxed at the marginal tax rate and receives a 15% tax rebate. This can be combined with salary sacrificing into Superannuation to reduce overall tax to as little as 15%. These are also called transition to retirement pensions.
• Only able to take out new type of allocated pension with a minimum payment per year.

Market Linked or Growth Pension

• This sort of pension has major benefits in providing income stream benefits and preserving your assets and are considered to be complying pensions by Centrelink.
• When a Growth Pension commences from Age or Service Pension age 50% of the funds assets are excluded from the Centrelink asset test. This may allow access to a government pension now or some time in the future. This rule changes for new Growth Pensions taken out after 20/9/07, as all new pension assets taken out after 20 September 2007 are counted for Centrelink purposes.
• There is a window of opportunity before 20/9/2007 to take out a market linked pension (term pension) and have only 50% of assets counted for Centrelink purposes.
• There is a set percentage each year that must be paid, which is determined each year depending on the market value of the investments.

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