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Self Managed Super Fund (SMSF) Article
How to Set up a pension - Step 4
By Tony Negline.
This article may be out of date.
18th November 2010
The trustee must prepare a Product Disclosure Statement.
According to the Australian Securities and Investments Commission, a PDS is meant to help “consumers compare and make informed choices about financial products".
A trustee must provide a PDS to members who are beginning a pension. This is the case even for super funds which are old.
There are formal detailed rules that detail what should be in a PDS. ASIC has also issued guidelines which assist financial product issuers work out what should and should not go into a PDS.
Most SMSF trustees won’t have time to go through the legislation and other documentation. Fortunately some legal firms have created generic PDS’ which can be amended for specific circumstances.
Before a trustee completes a PDS, they may need to use the services of other professionals. For example a trustee may need to value the assets of the fund to work out the market value of fund assets. This will help a trustee provide accurate information to a member. The member can then work out what suits their own circumstances.
A PDS must specify all the details of the pension the trustee proposes to pay to the member. The PDS should also tell the member what information the trustee needs to begin a pension. (Ideally this information should be detailed on an application form which the member can complete.)
The following information is necessary to begin a pension:
- commencement date (this is official start date of the pension; on this date the assets backing the pension begin to be taxed at 0%)
- the date of first payment (this date is self-explanatory; generally this date is not the same as the commencement date)
- specific pension product characteristics (such as the amount of money to be used to buy the pension; the first years’ pension income; number of pension payments per year; death benefit options, etc)
- the trustee may want a member to detail what assets should be sold to make pension payments.
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