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Retirees
to Benefit From Pension
Rule Changes
www.financialstandard.com.au
Austrailia
September 28, 2005
Retirees are set to benefit from the federal government's pension changes that take into account longer life expectancies and demand for more flexible allocated pension payments.
This week the government announced changes that will make allocated pensions, Australia's most popular retirement income stream, more attractive for retirees.
It will now allow term allocated pensions (TAPs) to extend the term so that payments can continue until the member reaches age 100. Previously, the term was based on the life expectancy of a member as if that member was five years younger.
Also, allocated pension drawdown factors will be changed to reflect current life expectancy enabling retirees to draw down their capital over the length of their retirement. This should alleviate fears that a retiree could well run out of income later on because the allocated pension drawdown factors were based on outdated formulas.
"We're pleased to see that allocated pension payments will be updated to reflect increased longevity", said the Investment and Financial Services Association (IFSA) chief executive officer Richard Gilbert.
"The current payment factors are based on life expectancy numbers from 1992, so it's time these were refreshed." he said.
Besides an extended term for TAPs, the government is allowing flexible payments. They can now vary between plus or minus ten per cent.
The changes will apply to new pensions from January next year.
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