Retirement phase income streams
What are the payment standards for lifetime income streams?
From 20 September 2007, there are two alternatives for the payment of a lifetime income stream, with the main difference between the two being the ability to commute.
The first alternative continues the old standards for a 'complying' lifetime income stream and is non-commutable other than in very limited circumstances. The second alternative is a very similar income stream that is, however, commutable.
Payment standards for lifetime income streams
|Feature||Non-commutable lifetime income stream||Commutable lifetime income stream|
|Term of the income stream||Payable for the life of the beneficiary and that of any reversionary.||Payable for the life of the beneficiary. May then revert to a dependant.|
|Income payment||Amount is fixed, with any variation specified in the contract/rules.||First year's payment must be at least the amount calculated using the relevant percentage factor.|
||Income payments can only vary through:
|Commutability||Commutable only in very limited circumstances.||Commutable at any time provided a pro-rated minimum payment is made.|
|Guaranteed period||Lesser of beneficiary's life expectancy and 20 years.||None specified.|
|Use of capital||Purchase price must be converted wholly into income payments.||None specified.|
|Reversion||Reversion can be to a child at least until their 16th birthday, or to the earlier of the cessation of full-time studies or their 25th birthday.||Can only revert to a dependant. If the dependant is a child, the income stream may only revert to a child under age 18 or a financial dependant under 25, and the reversionary income stream must cease at age 25. The income stream may revert without restriction to a disabled child of any age.|
|Able to be used as security for borrowing||No.||No.|
Last modified: Thursday, August 24, 2017