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Retirement phase income streams

Types of super income streams that can be paid

Section: 16.4

An income stream must meet the pension and annuity standards set out in the SIS regulations to be a superannuation income stream.

The pension and annuity standards changed on 1 July 2007 as part of the simpler super reforms. Below is a summary of the rules depending on the commencement date of the income stream

Before 1 July 2007
Pensions that commenced before 1 July 2007 and meet the previous regulations are deemed to meet the new minimum standards.

Between 1 July 2007 and 19 September 2007
Income streams may commence under either the old or the new SIS regulations. This effectively provides a transitional period during which an income stream provider can choose when to offer income streams under the new regulations.

From 20 September 2007 onwards
Only those income streams that meet the new regulations that commenced on or after 20 September 2007 can be paid. The new payment standards are more flexible and less prescriptive than the old standards, giving super funds greater choice in the type of income stream offered. For example, provided it also meets the payment standards for an account-based income stream, a fund could offer an income stream that also meets the old standards for a term allocated pension (sometimes referred to as a 'TAP clone').

There are essentially four different types of super income streams that can be paid that meet the pension and annuity standards in the SIS regulations:

  • Account-based income streams - these are broadly equivalent to old allocated pensions and annuities except they only have a requirement for minimum income payments and do not have a maximum income payment requirement unless it is a transition to retirement income stream. Transition to retirement income streams, which have additional payment standards, are a subset of these income streams.
  • Non-account-based (RCV) income streams - these are flexible income streams that do not have an identifiable account balance but may be commutable and have a residual capital value. There is no restriction on the term of the income stream, but there is a requirement for a minimum annual income payment.
  • Lifetime (nil RCV) income streams - there are two types of lifetime income streams available: the existing 'complying' lifetime income stream and a new commutable lifetime income stream.
  • Fixed term (nil RCV) income streams - a commutable income stream payable for a fixed term based on the recipient's age at commencement.

In all cases, the income stream cannot be added to through contributions or rollovers and neither the capital nor income can be used as security for borrowing. The table in section 16.5 outlines the key features of the new income stream standards.

Last modified: Thursday, August 24, 2017