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Retirement phase income streams

Minimum income percentage factors, pro-rata rule and '1 June rule'

Section: 16.6

Minimum income percentage factors

The minimum annual income payment for an account-based pension (including transition to retirement pensions) is calculated as a percentage of the account balance as follows:

Age

Minimum percentage for 2017-18 year

Under 65

4%

65-74

5%

75-79

6%

80-84

7%

85-89

9%

90-94

11%

95 and more

14%

Pro-rata rule and '1 June rule'

Where an income stream commences part way through the financial year, the minimum income payment is pro-rated based on the days remaining in the year.

Minimum payment = minimum annual payment x remaining number of days in financial year / number of days in financial year

Example

John commences an account based pension on 1 January 2017 at age 67. Initial purchase price is $300,000.

John's minimum annual payment: 5% x $300,000 = $15,000

As John's account based pension commenced part way through the financial year he is subject to a pro-rated annual payment.

Minimum payment = $15,000 x 181/365 = $7,438 (rounded to $7,440)

The '1 June rule' may also apply, which means that no payments are required to be made until the following financial year for an account-based pension or annuity commenced after 1 June in a financial year.

Last modified: Thursday, August 24, 2017