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Self Managed Super Fund (SMSF) Article
How to Set up a pension - Step 3

By Tony Negline.

This article may be out of date.

18th November 2010

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Step Three

Why is the pension being paid?  Broadly there are four possible reasons.

Firstly, a fund’s member has requested the trustee use their assets to pay a pension.  If this occurs then depending on their age the trustee should prepare documentation to show that the member’s Preserved Benefits and Restricted Non-Preserved Benefits can be paid.

If a member is aged less than 65 and ceased gainful employment (that is, doing a material mental or physical activity and receiving a tangible benefit for the work) before reaching age 60 then it is important for a trustee to have documentation to show that the gainful employment ceased.  For members in this age bracket, trustees should also document that they are reasonably satisfied that the member never again intends to be gainfully employed for more than 10 hours per week.

For those people who are aged at least 60 and ceased gainful employment after age 60 then a "gainful employment arrangement must have come to an end" and the trustee must be satisfied that the member never again intends to be gainfully employed for more than 10 hours per week.  The trustee needs to document the ending of the gainful employment relationship.

Secondly the member is aged over sixty-five and the fund's governing rules demand that a pension be paid or the member is permitted to request that one be paid.  However it needs to be pointed out that it is no longer necessary but a super fund trust deed demand this.

If any of these occur the fund must pay the member's super assets out either as one or more lump sums or as one or more pensions.

Thirdly the member has requested a Transition to Retirement pension.  That is the member is over their preservation age (for people born before July 1960 this is age 55) and has not satisfied a preservation condition of release.  In most situations this means the person will be under 65 and not permanently retired.

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This email is general in nature only and does not constitute or convey specific or professional advice. Legislation changes may occur quickly. Formal advice should be sought before acting in any of the areas discussed. Be aware that the information in these articles may become innaccurate with time. Responsibility is disclaimed for any inaccuracies, errors or omissions. Particular investments are neither invited nor recommended and hence this publication is not "financial product advice" as defined in Section 766B of the above legislation. All expressions of opinion by contributors are published on the basis that they are not to be regarded as expressing the official opinion of any other person or entity unless expressly stated. No responsibility for the accuracy of the opinions or information contained in the contributor's articles is accepted by any other person or entity. Copyright: This publication is copyright. If you wish to reproduce this article you require a license, which can be purchased here, to do so.

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