Specialist superannuation advisers may emerge as among the few winners from the Government’s Budget superannuation changes, according to a new analysis published by actuarial research house, Rice Warner.
The analysis has examined the Budget changes to Transition to Retirement (TTR) pensions and Transition to Retirement Income Schemes (TRIS) and has pointed to the number of decisions which will need to be made by both advisers and their clients, particularly those clients within self-managed superannuation funds (SMSFs).
The analysis said that the Government proposed in the Budget to retain the TTR pension but wanted to remove their tax-free treatment and that it had “also clobbered re-contribution strategies as these count towards the non-concessional lifetime cap of $500,000. In fact, the cap includes past re-contributed amounts even if these have just been recycling money for death tax minimisation”.
It suggested that one reason why some members would not establish a TRIS in future was that the Government proposed from July next year to remove the ability for members to elect to treat certain TRIS payments as lump sums which had meant that the first $195,000 of the taxable component could be withdrawn tax-free.
The analysis said that while some fund members aged under 65 and receiving a TRIS pension might decide to retire in order to retain the tax exemption on earnings from their pension assets, other fund members still in the workforce might still consider taking a TRIS pension until the tax emption is removed in July, next year.
“Another group of people who will continue to use a TRIS if the Government’s proposal becomes law are those who really use the pension income to transition into retirement. Typically, these members move from full to part-time work (whether by choice or out of necessity), using the pension income to help maintain their lifestyle as they approach full retirement,” the analysis said.
It said that among the clear winners from the Budget were the specialist financial superannuation advisers whose guidance should be in high demand — including in regard to TRIS pensions.
However, it noted that those who do not feel that they can afford this advice, and are not in a position to understand an increasingly complex system for themselves, may find that their retirement outcomes fall well short of what they could have achieved.
