Govt extends CIPRs deadline

1 November 2018
| By Mike |
image
image
expand image

The Federal Government has tweaked its retirement income covenant to overcome shortcomings identified by industry feedback including correcting an error in the way market-linked pensions are valued under the transfer balance cap when commuted or rolled over.

Importantly, the Government has also given superannuation funds more time to offer comprehensive income products in retirement (CIPRs) to 1 July, 2022 and has increased the threshold superannuation balance from $50,000 to $100,000.

The changes were confirmed by the Assistant Treasurer, Stewart Robert who said the change to the market-linked pensions arrangement would ensure that an individual’s transfer balance cap position was accurately reflected and would mitigate the risk of an individual breaching their cap if they chose to rollover or commute their market-linked pension.

He said the Government was also amending the law to maintain the capped defined benefit treatment of market-linked pensions under the transfer balance cap where they had been rolled over as a result of a successor fund transfer.

This would avoid situations where market-linked pensions that were rolled over as a result of a merger or acquisition could lead to individuals inadvertently breaching their transfer balance cap.

The minister said the law would also be amended to ensure that death benefits that include life insurance proceeds are not subject to tax when they are rolled over to a new superannuation fund, meaning that death benefit lump sums remained tax-free for dependants, even if rolled over within the superannuation system. 

The Government also announced that the definition of the life-expectancy period for innovative income streams would be amended to account properly for the number of days in a leap year, aligning the definition of life-expectancy with annuity anniversary dates and ensuring that individuals with the products were not being short-changed in a leap year.

The Government is also moving to provide transfer balance cap credits and debits for innovative income stream products that are paid-off in instalments, amending regulations to make sure that these products receive appropriate treatment under the transfer balance cap, regardless of how they are paid off.

Robert said that, finally, the valuation of defined benefit pensions under the transfer balance cap would be amended to reflect when pensions are permanently reduced following an initial higher payment, such as for some public sector defined benefit reversionary pensions or reclassification of invalidity pensions. This would ensure that holders of the pensions were not disadvantaged when reductions occurred.

Read more about:

AUTHOR

Add new comment

The content of this field is kept private and will not be shown publicly.

Recommended for you

sidebar subscription

Never miss the latest developments in Super Review! Anytime, Anywhere!

Grant Banner

From my perspective, 40- 50% of people are likely going to be deeply unhappy about how long they actually live. ...

2 months ago
Kevin Gorman

Super director remuneration ...

2 months 1 week ago
Anthony Asher

No doubt true, but most of it is still because over 45’s have been upgrading their houses with 30 year mortgages. Money ...

2 months 1 week ago

ASIC has issued a warning to super trustees regarding the underperformance of Choice super products....

21 hours ago

The corporate regulator has confirmed investigations are underway into member services by superannuation funds, starting with delays on death benefit claims....

3 hours ago

Australians spend all their super in retirement, draw down on super more than the minimum required, find retirement and super overly complex, and crave more information f...

3 hours 18 minutes ago