The introduction of choice of superannuation fund was not the only landmark event to occur on 1 July, 2005, it also represented the start date for the new regulatory regime allowing people to access their superannuation prior to retirement.
The financial vehicles for that new regime are so-called pre-retirement pension products (PREPs), and superannuation funds are expected to come under increasing pressure from members who have reached preservation age to provide access to the new arrangements.
That is the assessment of Sydney-based specialist superannuation lawyer Michael Hallinan of who has said in a column in Super Review (p25 July, 2005) that the regulatory changes will open up a number of new options for superannuation fund members who have reached preservation age.
Hallinan said that under the new regime people will have a number of options, including possibly accessing their superannuation savings to enjoy a short-term sea change.
He said a taxpayer could wind down their working week from five days to four and fill the resulting gap in their income by accessing their superannuation savings.
Alternatively, Hallinan said a taxpayer could move to a less demanding role with a lower salary, and access their superannuation savings to fill the resulting gap in income.
“A taxpayer could make a short-term sea change by accessing their superannuation savings,” he said.
Hallinan cautioned, however, that financial advisers and others recommending that people access their super funds needed to be careful to ensure people did not exhaust their savings or attract undue attention from the AustralianTaxation Office.
According to an assessment of the new PREP environment conducted by Hallinan, superannuation funds are not required to provide such arrangements and will not be in breach of the Superannuation Supervision Act if they fail to do so.
“Whether a fund is able to provide a PREP will depend on the trustee’s view as to the likely demand for such products and the product development issues involved in offering such products,” the assessment said.
