I acquired an SMSF deed in February 2007 - can I pay an account-based pension?

Although someone may have bought an SMSF deed before they were fully updated, the deeds are drafted broadly to take into account future changes.

In this case, the deeds in February 2007 specifically set out the terms and conditions of certain pensions that can be paid, but clause 27.2(d) of that deed also allows the fund to pay "any other form of pension which is acceptable to the Regulator or is within the requirements of the Relevant Law on such terms as the Trustee may determine".

Holding Redlich (the law firm that drafted the 2007 version of our SMSF deed) have provided us with the following general information about the pension clauses of that deed:

"Clause 27 provides a facility for such a lump sum benefit to be converted to an income stream benefit on terms agreed between the Pensioner and the Trustee which are within the range of outcomes possible for each type of income stream. The types of income stream benefit payable under the deed include an Allocated Pension/Non-Commutable Allocated Pension (payable under the conditions set out in clause 28) and a Market-Linked Pension/Non-Commutable Market-Linked Pension (payable under the conditions set out in clause 29) and such Defined Benefit and other Pensions as are permitted under the Relevant Law."

The new "account-based pensions" (which can be paid by super funds from 1 July 2007) are basically a type of allocated pension, with more generous minimum amounts that can be withdrawn each year (and no maximum). For more information about these, and the amounts that can be withdrawn, refer http://simplersuper.treasury.gov.au/documents/decision/html/final_decision-02.asp

and also http://www.ato.gov.au/Super/Self-managed-super-funds/Accessing-your-super/Paying-benefits/#Incomestreams and about retirement income streams generally: http://www.fido.gov.au/fido/fido.nsf/byheadline/Retirement+income+streams:+fact+sheets?openDocument

The definition and terms of payment of an "account-based pension" can be found in Regulations 1.03 and 1.06(9A) of the SIS Regulations 1994 - refer http://www.austlii.edu.au/au/legis/cth/consol_reg/sir1994582/s1.03.html and http://www.austlii.edu.au/au/legis/cth/consol_reg/sir1994582/s1.06.html.

 

Our current deed provides for the payment of an account based pension at clause 31.1(b) and clause 38 sets out the conditions that apply to these payments.

 

Finally, where a member is receiving an allocated pension (commenced before September 2007), we can if requested arrange for this allocated pension to be converted to an account-based pension.