Sent: 23-08-2011 13:58:03
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The Pension Mess
The Tax Office's draft ruling on pensions continues to dominate much of the technical commentary.
There are many flow on effects of the ruling especially the Centrelink implications of nominating a reversionary beneficiary and the changes it will make to the incomes test and the use of a longer life expectancy.
Only time will tell if this ruling survives in its current format with the start date being July 2007. How will large funds be able to go back and examine every death benefit that has been paid or even the tax implications of every full commutation?
At some point the Government will be forced to make a decision - either they elect to amend the law or the ATO agrees that it's ruling should commence at a later date.
In reality it's all quite a big mess and one that will be causing many retirees additional concern than they are already feeling because of recent market volatility.
In my view the funds management industry needs to move away from unitised funds for income stream products. The constant valuation of assets to prevailing market conditions and the total return nature of these products is simply not suitable for retirement income stream products. It would seem that my view is not widely shared within the financial services profession and product providers.
I think the Government also needs to allow the minimum income to be based on the moving average of the market value of assets over several previous years (say three to five years). This will help to smooth the income coming out of these products.
Retirees also need to be able to put money aside for later in life and not have it assessed for Centrelink purposes. This money could be left in the accumulation phase of super funds. The Government will then be picking up some income tax from the earnings of this money. Perhaps you could only access this money if your main investments disappear (through market movements or fraud etc) or if you reach your then life expectancy plus three years when you were 65.
I am not convinced the answer is deferred annuities which seems to be pushed by some actuaries.
Transparency is a key issue.
Finally please consider purchasing a copy of this book "A How To Book Of Self Managed Super Funds". You can look at the contents page at the following link: http://www.atcbiz.com.au/r.php?r=0mjd6ne
For details of the changes made from version 4 to version 5 visit: http://www.atcbiz.com.au/r.php?r=d5xcpch
As you'll see from the list there have been many changes.
Two purchase options are available - once only subscription - $55 inc GST - or an annual subscription will gives you access to all the updates made throughout the year ($120 inc GST). The book can be purchased at the following link: http://www.atcbiz.com.au/r.php?r=5a4agqb
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