Account-based pension payments will be recalculated during the first week of July. Please review your clients’ pension indexation settings before 1 July 2020.

Calculating minimum pension payments

All pension accounts opened before 1 June 2020 must take a minimum pension payment calculated using the minimum percentage factor relating to their age.

The minimum pension is calculated by multiplying your client’s pension account balance as at 1 July 2020 by their percentage factor as shown below.

Client’s age

Percentage factor (%)

Under 65

2

65 – 74

2.5

75 – 79

3

80 – 84

3.5

85 – 89

4.5

90 – 94

5.5

95 or older

7

Calculating minimum pension payments

1.    Before 1 July

Review your clients' pension payment details and make any amendments before 30 June 2020.

You can learn more about amending your clients' pension payments here.

If you’ve reduced your client’s pension payment amount to zero during the 2019/20 financial year, we’ll be updating the next pension payment date to the next financial year (2020/21) based on your client’s payment frequency.

2.    1 July to 8 July

No changes can be made to pension accounts online during the pension recalculation. Any pension payments or lump sum payment requests received during this time will be processed after the pension recalculations have been finalised.

3.    From 9 July

Any additional changes can be made online from 9 July to 12 July to take effect for the July pension payment. 

Temporary reduction in pension minimum requirements

As part of their response to coronavirus, the Federal Government announced a 50% reduction to the annual pension minimum requirements for the 2019/20 and 2020/21 financial years.

These reduced annual pension minimums, as shown in the table above, are the minimums we’ll apply when calculating your clients’ pension payments for the 2020/21 financial year.

Important information:

If your client's pension indexation method is currently set to "Minimum" but they wish to receive payments higher than the reduced annual pension minimums in the 2020/21 financial year, you need to:

  • change the pension indexation method to "None", and
  • manually elect the higher amount.

If you don’t do this, we'll set it to the reduced annual pension minimum amount.

Indexation types

Below is a summary of the various indexation types and their effects. 

Indexation type

Effect upon the July pension recalculations

Minimum

The annual pension will be based on the minimum percentage factors

Fixed percentage

The annual pension amount will increase by the fixed percentage previously selected for the account (see note 1)

CPI

The annual pension amount will increase in line with movements in the consumer price index (CPI) (see notes 1 and 2)

None

The annual pension amount will not change (see note 1)

Maximum

Only applies to transition to retirement pensions. The annual pension will change to the recalculated maximum

Standard

Only applies to Term Allocated Pensions. Recalculations for these accounts will revert to the standard (100%) annual payment amount (see note 3)

Please note:

  1. When the selected indexation method results in a pension below the required minimum annual payment for 2020/21, the pension level will be raised to the minimum to meet legislative requirements.
  2. Your clients' pension payments will be adjusted according to the annual rate of increase in the ‘All groups CPI weighted average of eight capital cities’ (March quarter) as published by the Australian Bureau of Statistics.
  3. Term Allocated Pension accounts will be recalculated based on the standard (100%) annual payment amount (ie without taking into account the ability of clients to vary payments to between 45% and 110% of this amount). Retail Term Allocated Pension accounts which currently operate on a non-standard pension level will be recalculated in line with this arrangement.

You won't be able to make any changes to pension accounts online during the recalculation period. Any pension payments or lump sum benefit payment requests received during the pension recalculation period will be processed after the pension recalculation has been finalised.

Need help?

You can visit Adviser Help Centre to view all our End of Financial Year resources.