Proposed detail on the new market-linked income stream products, otherwise known as ‘growth pensions’, to be available from September 20 this year was released by Minister for Revenue and Assistant Treasurer, Senator Helen Coonan, and Minister for Family and Community Services, Senator Kay Patterson, earlier this week.
Senators Coonan and Patterson also called for input from industry and other stakeholders into how growth pensions would best work to provide more retirement income options.
The proposed characteristics of the new products have been released prior to the passing of the legislation to assist product providers with development and to help retirees’ planning.
They include that the term of the product will be the beneficiary’s life expectancy at the time of purchase rounded up to the nearest whole number; that payments from the product must be made at least annually; that retirees will be able to purchase the products from below age pension age; that the capital value of the product will be unable to be used as a security for borrowing; that the annuity or pension will be prevented from being transferred to another person except in specific circumstances; and that retirement savings account providers will also be able to offer market linked income stream products.
As announced earlier in the year, the products will be eligible for the higher reasonable benefit limit and a 50 per cent assets test exemption.
Macquarie Financial Services has supported the Government’s guidelines for growth pensions, with Macquarie head of technical services David Shirlow saying that the proposed design takes a sensible approach to addressing retirees needs, and that it indicates significant improvements on the complying pensions currently available.
“For example, the Government is seriously considering allowing retirees to select pensions which will run for a suitably long term, longer than average life expectancy. This is important, because with advancements in medicine the majority of people can expect to live beyond the life expectancies specified in the latest life expectancy tables,” Shirlow says.
Shirlow says he expects many retirees will invest in a blend of a growth pension and an allocated pensions (which are ‘complying’ pensions for asset tests and super benefit limit purposes but allow more flexible withdrawals) to meet their retirement income needs
Comments on the proposed characteristics have been invited by the Government, and will be accepted up until April 14 2004.
