News: Pension Drawdown Reduction

20th February 2009

As a result of the significant downturn in financial markets the Government has announced a 50 per cent reduction in the minimum drawdown requirement for account-based pensions for 2008-09. This measure will apply to account-based, allocated and term allocated pensions and annuities.

What are the changes to the minimum annual payment amounts?
The minimum annual income payment for an account-based pension is calculated as a minimum percentage of the account balance as follows:

Age	Minimum annual payment	Minimum annual payment for 2008/09 as per Government announcement*
Under 65	4%	2%
65-74	5%	2.50%
75-79	6%	3%
80-84	7%	3.50%
85-89	9%	4.50%
90-94	11%	5.50%
95 and Over	14%	7%

*Please note that where a pensioner has already received in excess of the new minimum, the minimum in their case will be the amount they have actually received. No refund will be allowed.

No maximum annual income payment applies unless the pension is a pre-retirement pension (in which case the 10% maximum applies).

Implications of the changes
In summary, and based on our understanding at this time:
- If a member were to commence an income stream today, they would still need to draw down 50% of the pro-rated minimum amount by 30 June 2009;
- If a member has not yet received any pension payments this financial year, they must still draw down 50% of the annual minimum amount by 30 June 2009;
- If a member wishes to fully commute their pension, they would still need to draw down 50% of the pro-rated minimum amount.

If you have an account based or allocated pension and wish to know more about the reduction in pension payment feel free to contact your Southern Cross adviser