Term allocated pension (TAPs) providers received a boost last week after the Federal Government extended the period in which pension payments can be made.
From January 1, 2006, the term of TAP payments will no longer be based upon the life expectancy of a fund member, but instead will be allowed to continue until they reach the age of 100.
The Government also agreed to permit previously set annual pension payments from TAPs to vary between plus or minus 10 per cent.
Changes will also be made to new allocated pensions established after January 1, 2006, to align draw down factors with the life expectancy of retirees, a move expected to increase the ability of retirees to draw on their capital throughout the duration of their retirement.
As well as the changes to the TAP rules, Minister for Revenue and Assistant Treasurer Mal Brough confirmed that controversial Government plans to ban self-managed superannuation funds (SMSFs) from providing defined benefit pensions would not be scrapped.
The Government made the shock decision to ban small funds with less than 50 members — including SMSFs — from providing defined benefit pensions in the 2004 Federal Budget.
However, faced with strong opposition to the changes, the Government had agreed to reconsider the changes as part of the review.
But last week Brough confirmed the changes would go ahead. People who were members of small funds on May 11, 2004, and who retire on or after age 55 or reach age 65, before January 1, 2006, will be the only group who can still commence a defined benefit pension.
