Allocated pensions
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What is an allocated pension? | How does tax work with an allocated pension? What is a non-commutable allocated pension? |
What is an allocated pension?
Allocated pensions are investments that use your superannuation savings to provide a flexible regular income in your retirement. You invest a lump sum in an account that accumulates investment earnings, then draw down regular income payments within Government guidelines. You can vary your income level yearly to match your lifestyle.With an allocated pension you can:
- choose a portfolio best suited to your needs from a variety of asset classes including shares, property and fixed interest
- access your capital at any time
- alter your income level each year within Government set limits
- switch your investment portfolios.
How does tax work with an allocated pension?
If you are age 60 or over, allocated pension payments and lump-sum withdrawals are tax-free.If you are under age 60, allocated pension payments form part of your assessable income and are taxed at your marginal tax rate (plus Medicare levy). A rebate or tax offset of up to 15 per cent of the taxable amount may be available.
Allocated pensions are subject to pay-as-you-go tax, just like your salary when you are working.
Allocated pensions may offer significant tax advantages by:
- enabling you to defer your lump sum tax
- providing tax-free earnings on the assets backing the investment
- potentially providing a tax-free element of your regular payment.
Why should I consider an allocated pension?
Allocated pensions generally suit your retirement income needs if you:- require a regular income in retirement
- want greater control of your investments or want to take an active role in managing your investments
- require access to your capital (with the exception of non-commutable allocated pensions)
- want the ability to alter your investment choices
- want the ability to alter your income level.
What is a non-commutable allocated pension?
A non-commutable allocated pension (NCAP) is an allocated pension that can be purchased with preserved superannuation benefits. It provides a flexible and tax-effective way for people to access their superannuation benefits from preservation age (currently 55), without having to choose between full-time employment and full-time retirement.An NCAP cannot be exchanged for a superannuation lump sum benefit, unless:
- you convert the pension back into accumulation phase
- you die
- you need to pay out the pension to purchase another non-commutable income stream.
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As at 30th March 2011, AXA Asia Pacific Holdings Limited and all of its Australian and New Zealand subsidiaries ceased to be members of the Global AXA Group and became members of the AMP Group.
