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Total superannuation balance

Retirement phase value

Section: 18.5

The retirement phase value of a client's total superannuation balance is the balance of a client's transfer balance account, adjusted to reflect the current value of an interest in an account-based income stream at a particular time (see further information below).

The following retirement phase income streams are included in the balance of a client's transfer balance account:

  • account based income streams
  • capped defined benefit income streams' (special value used)
  • deferred superannuation income streams that are retirement phase income streams (see section 5.8 for further information)
  • transition to retirement income streams that are retirement phase income streams (see section 10.2 for further information)
  • income streams that are not account based or capped defined benefit income streams, and
  • death benefit income streams including reversionary income streams (special rules apply).

Valuations for transfer balance account purposes are determined:

  • on 30 June 2017 for income streams commenced prior to 1 July 2017, or
  • on the starting day for those income streams commencing on or after 1 July 2017.

Superannuation income streams (other than account based income streams) retain the value attributed to the transfer balance account.

Example: retirement phase value

George commenced a lifetime pension on 1 December 2016. The lifetime pension paid had an annual entitlement of $30,000 (based on the first payment after 1 July 2017 annualised).

As the lifetime pension met the definition of a capped defined benefit income stream, the transfer balance account credit at commencement of the income stream is:

Annual entitlement x 16

$30,000 x 16 = $480,000

George's total superannuation balance at 30 June 2017 is the sum of:

  1. Accumulation phase values: nil
  2. Retirement phase values: $480,000
  3. Rollover superannuation benefits: nil

Therefore the value of George's total superannuation balance at 30 June 2017 is $480,000.

Note: only account based income streams are re-valued each 30 June when determining a client's total superannuation balance; all other retirement phase income streams are not re-valued, regardless of future indexation of annual pension payments. Continuing on with this example, if George's lifetime pension increased to $31,000 on 1 July 2018, his transfer balance account on 30 June 2019 remains at $480,000 assuming everything else stays the same.

Adjustment for account based income streams

When determining the retirement phase value of a client's total superannuation balance, the balance of a client's transfer balance account is adjusted to reflect the actual value of an interest in an account-based income stream.

Account based income streams include allocated pensions and annuities, account based pensions and annuities and market linked pensions and annuities (ie. term allocated pensions).

Under the rules, the following credits and debits that have occurred in relation to an account based income stream are disregarded so as to reduce the effective value of that income stream in their transfer balance account back to zero:

  • Credit: commencement of a retirement phase income stream
  • Debit: commutation of a retirement phase income stream
  • Debit: an event that reduces the client's superannuation interest (eg. fraud or dishonesty, bankruptcy)
  • Debit: payment split (divorce or relationship breakdown)
  • Debit: superannuation income streams that fail to comply with the standards
  • Debit: superannuation income stream that fails to comply with a commutation authority.

While most credits and debits in relation to account based income streams are disregarded, the following credits and debits are not disregarded:

  • Credit: excess transfer balance earnings
  • Debit: structured settlement contributions (see further information below)
  • Debit: non-commutable excess transfer balance

Once the relevant credits and debits in relation to any account based income streams are disregarded, the value of the transfer balance account is then increased by the total amount of superannuation benefits that would become payable if the client ceased any account-based income streams (ie. the account balance(s)).

Example: account based income streams

Jen commenced an account based income stream on 1 July 2017 with a starting balance of $500,000. On 1 December 2017 she commuted $100,000 of her account based income stream as a lump sum withdrawal. She has no other retirement phase income streams, funds in accumulation phase or rollover superannuation benefits.

Jen's transfer balance account balance is:

Credit Commencement of retirement phase income stream

$500,000

Debit Partial commutation of retirement phase income stream

($100,000)

Balance  

$400,000

On 30 June 2018, Jen's account based pension has a current balance of $425,000.

In this case, the value of previous credits and debits in Jen's transfer balance account in relation to her account based pension would be disregarded - effectively reducing the value of her account based pension in the transfer balance account back to zero.

The current market value of Jen's account based pension is then credited to her transfer balance account.

Jen's total superannuation balance at 30 June 2018 is the sum of:

  1. Accumulation phase values: nil
  2. Retirement phase values: $425,000
  3. Rollover superannuation benefits: nil

As a result, the value of Jen's total superannuation balance on 30 June 2018 is $425,000.

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Example: account based income streams

Pauline commenced an account based income stream on 1 May 2018 with a starting balance of $2,000,000. As the transfer balance cap is $1,600,000, she has an excess transfer balance of $400,000.

On 1 June 2018 she commutes $500,000 of her account based income stream as a lump sum withdrawal. As she exceeded her transfer balance cap for 30 days, excess transfer balance earnings of $3,036 (assuming an earning rate of 9.2%) accrue.

At 30 June 2018, the account balance of the account based pension is $1,510,000.

She has no other retirement phase income streams, funds in accumulation phase or rollover superannuation benefits.

Pauline's transfer balance account balance is:

Credit Commencement of retirement phase income stream

$2,000,000

Credit Excess transfer balance earnings          $3,036
Debit Partial commutation of retirement phase income stream

($500,000)

Balance  

$1,503,036

In this case, the value of the credit for commencing the account based pension ($2,000,000) and the debits for partial commutation ($500,000) are disregarded.

However the credit for excess transfer balance earnings ($3,036) is not disregarded.

The current market value of Pauline's account based pension is then credited to her transfer balance account ($1,510,000).

Pauline's total superannuation balance at 30 June 2018 is the sum of:

  1. Accumulation phase values: nil
  2. Retirement phase values: $1,513,036
  3. Rollover superannuation benefits: nil

As a result the value of Pauline's total superannuation balance on 30 June 2018 is $1,513,036.

Last modified: Wednesday, August 23, 2017