In response to the decline in asset prices, the Government have announced a temporary reduction in the minimum pension factors for the 2019/20 and 2020/21 financial years. As a result, minimum pensions for each year are now halved. The reductions apply to:
Note the reduction for market-linked pensions can be applied after the allowable 10% variation. So the standard minimum could first be reduced by 10% and then halved again, resulting in an amount equal to 45% of the standard minimum for the year.
Where any pension member has already withdrawn more than the adjusted minimum in this financial year, they are unable to return the excess unless they are eligible to make further contributions.
For clients who make regular or automated withdrawals, they are likely to have already exceeded their reduced minimum for this year. In that case they may want to consider suspending further withdrawals for the remainder of this financial year, and then implementing reduced payments for next financial year. Of course any action needs to take account of your clients’ cash-flow needs.
As always SMSF Engine are available to assist with your workload whether that be on a one-off or permanent basis.