Two-tier approach to longevity for SMSFs
Self-managed superannuation fund (SMSF) trustees can help meet the challenges posed by longevity by structuring their funds and investments such that a portion of their money becomes available after about age 80.
That was the bottom line of a session delivered to the SMSF Professionals’ Association of Australia conference by Heffron Consulting principal Meg Heffron and ipac South Australia executive director Peter Crump.
While people such as former Prime Minister, Paul Keating have advocated quarantining a portion of superannuation guarantee contributions to deal with retirement incomes after about age 80, Heffron and Crump are advocating a similar outcome be achieved by separating superannuation balances into two streams - one a conventional stream to be used in the early years of retirement and another to be used in the latter years.
Crump and Heffron suggested the formula was workable even under current tax settings, but cautioned that a number of decisions would need to be made, including whether the latter pension was effectively quarantined.
Crump said that while annuities were proving a popular option, they were not the preferred product for many SMSF trustees, particularly those who understood the implications of dying early.
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