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On 22 March 2020 the federal government announced that the minimum pension drawdown rates would be temporarily halved for the 2019/20 and 2020/21 financial years. This is due to many retirees losing a significant portion of their super account balance as share markets have plunged due to COVID-19. This rule change assists retirees who do not wish to sell their investment assets while the value of those assets is reduced
Once you start a pension or annuity on or after 1 July 2007, a minimum amount is required to be paid each year. There is no maximum amount other than the balance of your super account, unless it is a transition to retirement pension which is not in the retirement phase, in which case the maximum amount is 10% of the account balance.
| Minimum Pension Draw-Down Rates | |||
| Age | % of account balance | ||
| 2018-19 | 2019-20 | 2020-21 | |
| Under 65 | 4% | 2% | 2% |
| 65-74 | 5% | 2.5% | 2.5% |
| 75-79 | 6% | 3% | 3% |
| 80-84 | 7% | 3.5% | 3.5% |
| 85-89 | 9% | 4.5% | 4.5% |
| 90-94 | 11% | 5.5% | 5.5% |
| 95 or over | 14% | 7% | 7% |
The draw-down amount is calculated from a members’ balance as of the 1st of July each financial year (or for practical purposes the 30 June balance from the preceding financial year).
To meet the minimum pension 2020 draw-down requirement, at least one payment must be made in the financial year, and it must be made in cash prior to 30 June 2021. Where a pension commences part way through a financial year, a pro-rata minimum pension draw-down applies and is calculated based on the number of days remaining in the financial year.
More information from the ATO here:
If you receive an account-based pension from your SMSF and you wish to only withdraw the required minimum, you can hold off on drawing any further payments for the remainder of the financial year if you do not need the income. Similarly, if you’ve been taking a monthly payment based on the calculated minimum pension it may be worthwhile stopping the withdrawals for the remainder of the financial year.
The main advantage of not being forced to withdraw the normal SMSF minimum pension for the 2020 financial year is that you will retain the cash within your SMSF which can be deployed as part of your investment strategy to take advantage of any potential uplift in equity values which may occur after severe, sharp market downturns like the one we’re currently experiencing as a result of the COVID-19 pandemic.
Typically not. Anything already withdrawn from your SMSF as a pension payment over the reduced minimum cannot be returned to your SMSF as a reversal of a pension payment already taken. You may be eligible to re-contribute any amounts taken in excess of your requirements, however, advice must be sought prior to doing so to determine your eligibility to contribute.
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