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Retirement phase income streams

Payment standards for non-account-based (RCV) income streams

Section: 16.8

Non-account-based (RCV) income streams are flexible income streams that allow a retiree to invest in a guaranteed income stream with a residual value and no restrictions on term.

These income streams:

  • do not have an identifiable account balance
  • may provide for an RCV, commutation value or withdrawal benefit that is no more than 100% of the purchase price (note that this is the only standard under which a non-account-based income stream such as an annuity can provide an RCV), and
  • must pay an annual income payment of at least a minimum amount.

Non-account-based (RCV) income streams are most likely to be fixed term annuities.

There are two choices for a retiree wishing to invest their super in a fixed term annuity:

  • any term, with up to 100% RCV, but with each year's income payment of at least a minimum amount. In practice, the requirement for minimum income payments each year may constrain a client's choice of RCV and/or fixed term, or
  • a term lasting up to age 100, with no RCV and only the first year's payment of at least a minimum amount (see section 16.10).

The minimum annual income payment from a non-account-based (RCV) income stream (rounded to the nearest $10) is calculated as shown below. It is a similar calculation to that used for account-based income streams, with purchase price used in place of account balance.

Minimum payment for non-account based income stream

Minimum annual income = Purchase price  X  percentage factor

where:

Purchase price = the total amount paid as consideration to purchase the income stream.

Percentage factor is determined from the recipient's age on commencement of the income stream and at each 1 July thereafter, using the table in section 16.6.

As with account-based income streams, a pro-rated income payment must be made in the first year and the 1 June rule continues to apply.

Last modified: Thursday, August 24, 2017