Retiree clients of financial planners will be able to tap into the capital base of complying income streams when changes to legislation come into effect on Thursday.
The legislation, the Family and Community Services Legislation Act 2001, is part of changes to the Social Security Act and will allow people with a complying income stream to access their capital in emergency situations.
Colonial First Statetechnical services team manager Erica McConnell says the changes will apply to products such as lifetime annuities and lifetimes pensions as well as term certain products.
“These products have not been recommended in some cases by planners because they lock up capital, but the changes now allow retirees to get the funds back in certain events,” McConnell says.
“In the past the funds have not been put in a complying income stream because of a fear of having to use the funds for a rainy day, such as medical treatment, but this offers more flexibility in using complying income streams.”
The new rules will only allow retirees access of the capital in times of hardship to meet with unavoidable expenditure and will not affect the asset tests exempt status of their complying income stream.
Expenses covered by this proviso will include essential medical expenses not covered by health insurance, the cost of replacing or essential repairs to the principal home not covered by insurance and the replacement of essential household goods not covered by insurance.
A number of restrictions have been placed on accessing the capital which will only be allowed on the condition that the retiree has insufficient other assets to meet the expenditure.
