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Reduced minimum pension drawdown rates extended for 2022–23

14 Sep 2022 3 min read

What is the reduced minimum pension drawdown?

If you have a super income stream product — like the NGS Income account — there is a legislated minimum amount you must draw down from it each financial year. In response to COVID-19, the government temporarily halved that minimum amount to ease concerns about selling down assets to meet drawdown requirements when markets were so volatile.

As part of this year’s Federal Budget, the reduced minimum pension drawdown rate was extended for the 2022–23 financial year. Here are the drawdown rates, by age group:

Your age as at 1 July 2021-22 and 2022-23 financial years — minimum annual payment
(% of your account balance)
Subsequent years — minimum annual payment
(% of your account balance)
Up to age 65 2.00% 4.00%
65–74 2.50% 5.00%
75–79 3.00% 6.00%
80–84 3.50% 7.00%
85–89 4.50% 9.00%
90–94 5.50% 11.00%
95+ 7.00% 14.00%

Why has the reduced minimum drawdown rate been extended?

The government first reduced the minimum payment drawdown rate for super pensions in response to the economic impact of COVID-19. The reduced rates have been in place since the 2019–20 financial year. The government announced that the temporary reduction would continue for the 2022–23 financial year, to help Australian retirees recover from the economic impact of COVID-19. Because of this, you may choose to keep more of your money invested rather than selling down.

How do I change my pension drawdown amount?

If you’ve got an NGS Income account, you can change your income payments through Member Online or by completing a Request to vary your income stream payments form.

What do the reduced pension drawdown rates mean for me?

If you have a super pension product, the reduced rates mean you don’t have to draw down as much as usual to meet the legislative requirements. The following case study shows the impact of the reduced rates.

Case study

Michelle is 67 years old and retired. She has an NGS Income account, which had a balance of $400,000 on 1 July 2022. Using the reduced rate — 2.50% for 65 to 74-year-olds — Michelle only needs to draw down $10,000 for the 2022–23 financial year. If it weren’t for the reduced rates, Michelle would have had to draw down $20,000.

So, for the 2022–23 financial year, Michelle can draw down any amount above $10,000. If she decides to only withdraw the $10,000 minimum, the extra money she normally would have had to withdraw will remain invested instead.

Frequently asked questions

What is the minimum allocated pension drawdown?

This depends on your age and the year. Refer to the table above to check the minimum pension payment rates that apply to you for the 2022–23 financial year and subsequent years.

What percentage should I draw down from my pension?

This will depend on what your needs and expenses are. The reduced minimum may not be enough to cover your needs — for example, in the case study above, Michelle may need more than $10,000 to cover her expenses for the year. There is no maximum limit on how much you can withdraw from a super pension (unless it’s a transition to retirement product). If you need help working out how much you should draw down from your pension account balance, book a complimentary chat with an NGS Super Specialist.

How do I calculate my minimum pension drawdown amount?

If you’re an NGS member, you can view your minimum annual pension amount by logging in to Member Online and selecting ‘Withdrawals’ from the menu.

Your minimum pension drawdown amount for the 2022–23 financial year is calculated based on your account-based pension balance on 1 July 2022. The pension rate relevant to your age at 1 July (see the table above) is applied to your 1 July balance to calculate your minimum pension withdrawal amount.

Example

1 July 2022 balance:

$380,000

Age at 1 July 2022:

80

Relevant drawdown rate for 2022–23:

3.50%

Minimum pension withdrawal amount 2022–23FY

= 1 July balance x drawdown rate

 

= $380,000 x 3.50%

 

= $13,300

Need help?

If you need help working out your minimum pension drawdown amount or have general enquiries on account-based pensions, call us on 1300 133 177, Monday to Friday, 8am–8pm (AEST/AEDT).

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