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Re-boot pension
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pdjdom View Drop Down
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Joined: 09/March/2010
Location: Australia
Posts: 1 		  Quote pdjdom Quote  Post ReplyReply Direct Link To This Post Topic: Re-boot pension
    Posted: 09/March/2010 at 15:13
I'm 58 years old and retired, and am currently receiving an account-based pension from my SMSF. During the 2009 financial year, I made 2 large personal contributions into the fund to take advantage of the 15% tax rate on the earnings.

Rather than having a new separate Accumulation account, is it possible to commute my existing pension on the day that the contributions were made, add the contributions to my existing balance, and start a new pension?

My trust deed says "On the written application of a Pensioner, the Trustee may commute to a lump sum benefit the whole or any part of any type of Pension payable from the Fund to such Pensioner provided that the commutation of the Pension is permitted by the Relevant Law and the rules of the Pension".

Does this mean that the pension can be commuted with a lump sum of nil?

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evolve View Drop Down
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Joined: 11/April/2010
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Posts: 11 		  Quote evolve Quote  Post ReplyReply Direct Link To This Post Posted: 11/April/2010 at 16:42
Yeah, how old is your deed? I hope it is not too old if you have an account based pension.

You need to check to ensure the deed enables a pension to be rolled back to the accumulation account.

Once you commute the pension back to the accumulation account, you can commence a new AB Pension with the additional contributions. Once again you need to check the trust deed as it should give you instruction how all this has happened.

Check with your accountant in regards to all the documentation required. Depending on the timing it may be more cost effective to do it all the end of the financial year so your pension account doesn't have to be re-valued on the date you made the last of the 2 contributions.

I reckon converting a pension to a lump sum under your deed basically means taking a lump sum cash amount out of your SMSF - i.e. payment of a lump sum. I take it this is NOT what you are after considering you put more to take advantage of the tax benefits.

Also, if the assets / investments are supporting a pension, the tax on those earnings will be 0%

I hope this answers your questions .

evolve
General comment only-doesn't constitute advice. Before making financial decisions see a professional adviser who knows your specific circumstances.
http://www.evolvemysuper.com.au

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