Minimum Pension Withdrawals Cut in Half for 2020 & 2021
As part of the economic response to COVID-19, superannuation minimum drawdown requirements for account-based pensions and similar products will be reduced by 50% in 2019-20 and 2020-21.
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||Default minimum drawdown rates (%)
Reduced rates by 50 per cent for the 2019-20 and 2020-21 income years (%)
Example from Government Fact Sheet:
Mike is a 66 year old retiree with a superannuation account-based pension.
The value of Mike’s account-based pension at 1 July 2019 was $200,000. Under current minimum drawdown requirements, Mike is required by legislation to drawdown 5 per cent of his account balance over the course of the 2019-20 and 2020-21 income years.
This means Mike has to drawdown $10,000 by 30 June 2020 to comply with the minimum drawdown requirements. Following the temporary reduction in minimum drawdown requirements, Mike will now only be required to drawdown 2.5 per cent of his account balance, that is, $5,000, by 30 June 2020.
If Mike has already withdrawn over $5,000 for 2019-20, he is not able to put the amount above $5,000 back into his superannuation account. 2 On 1 July 2020 the value of Mike’s account-based pension is $180,000 (after drawdowns and investment losses).
During 2020-21, Mike is required to drawdown 2.5 per cent of his account balance, which is $4,500, instead of $9,000. As a result of this change to minimum drawdown requirements, Mike is able to preserve his capital while still drawing an income from his superannuation.
Click here to download the Fact Sheet.
Please contact our Superannuation Administrator, Anne Burridge, with any questions or concerns regarding your superannuation.