Drawdown relief extended to 2012-2013

The 25 per cent drawdown relief for account-based pensions has been extended to the 2012-2013 financial year, in a move the Government says will benefit around 125,000 self-funded retirees.

The move continues the 25 per cent reduction that was put in place for the 2011-2012 financial year, and acknowledges the impact of share market volatility on retirement savings. This was scaled back from the 50 per cent reduction that was in place for the previous three years.

"The provision of drawdown relief for the past four years has assisted account-based pension holders by reducing the need for them to sell assets at a loss in order to meet the minimum payment requirement," said Assistant Treasurer and Minister for Financial Services and Superannuation Bill Shorten, in a statement.

"The Government had indicated previously the minimum payment amounts would return to normal in 2012-2013. However, equity markets continue to be volatile and prices remain significantly below the levels reached prior to the GFC," he said.

"Continuing the current limited drawdown relief for a further year will assist retirees to recoup capital losses on their pension portfolios as equity markets recover over time."

The move was broadly welcomed by the Small Independent Superannuation Funds Association (SISFA), although SISFA chair Michael Lorimer said the Association would have preferred the Government retain the original 50 per cent reduction.

However, Challenger's chairman of retirement incomes Jeremy Cooper said the move highlighted a shortcoming in the nation's retirement system through its over-reliance on equities, which could not be relied upon to provide bedrock or lifetime retirement income.