The Do's and Don'ts With Allocated Pensions
Should you turn your superannuation into an allocated pension? An allocated pension is an account you can put your super savings into. The allocated pension fund will pay you a regular income during your retirement. Of all the benefits from having a pension super fund, the most attractive are undoubtedly the tax benefits. The returns on the investments you hold in your allocated pension super fund do not incur taxes: this means you may save thousands if not a lot more throughout your life. The tax-fee earnings remain in your account, which in turn increases its value. By doing this you can potentially increase the life of your pension.
Allocated pensionsaren't the only way of receiving your pension
Get the best results:
Let's say you have just reached the retirement age and you have $500,000 in super. You sit down with your financial planner, who advises that your best option is to roll your super into a superannuation allocated pension. The law dictates that for the first year of your allocated pension, you must withdraw a minimum pension of x amount of dollars.
You may decide to receive $40,000 per annum as income for your first year. You take this amount of money from your allocated pension. Because you are older than 60 years of age, this money is not taxable and you receive the full $40,000 tax free.
Know the facts or you could lose out:
Let's say you have $500,000 in your super fund savings but you decide to retire at age 59. Instead of rolling the money into a superannuation allocated pension fund, you withdraw the money in its entirety as a lump sum. Let's assume that $300,000 of that money is a taxable part of the fund and that you are entitled to $165,000 tax free threshold. That means you will pay taxes on the remaining $135,000. Those taxes may come to $27,225 because of the 16.5 percent tax rate, including the Medicare levy.
The investments you purchase with this money you have drawn are subject to ordinary tax law; you are not entitled to the tax concessions that are applicable only to pension investments.
Ideally, when you turn 55 you should see a financial planner to plan the next ten years of your life.This may involve beginning a transition to retirement plan which will allow you to work and receive a pension at the same time.
Allocated pensionsaren't the only way of receiving your pension
Get the best results:
Let's say you have just reached the retirement age and you have $500,000 in super. You sit down with your financial planner, who advises that your best option is to roll your super into a superannuation allocated pension. The law dictates that for the first year of your allocated pension, you must withdraw a minimum pension of x amount of dollars.
You may decide to receive $40,000 per annum as income for your first year. You take this amount of money from your allocated pension. Because you are older than 60 years of age, this money is not taxable and you receive the full $40,000 tax free.
Know the facts or you could lose out:
Let's say you have $500,000 in your super fund savings but you decide to retire at age 59. Instead of rolling the money into a superannuation allocated pension fund, you withdraw the money in its entirety as a lump sum. Let's assume that $300,000 of that money is a taxable part of the fund and that you are entitled to $165,000 tax free threshold. That means you will pay taxes on the remaining $135,000. Those taxes may come to $27,225 because of the 16.5 percent tax rate, including the Medicare levy.
The investments you purchase with this money you have drawn are subject to ordinary tax law; you are not entitled to the tax concessions that are applicable only to pension investments.
Ideally, when you turn 55 you should see a financial planner to plan the next ten years of your life.This may involve beginning a transition to retirement plan which will allow you to work and receive a pension at the same time.
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