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Retirement phase income streams

Payment standards for lifetime income streams

Section: 16.9

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.
Indexation Annual payment:
  • must be at least the amount of the previous year's payment, and
  • cannot decrease other than through CPI decreases.
Income payments can only vary through:
  • fixed indexation
  • CPI indexation, or
  • AWOTE indexation.
Commutability Commutable only in very limited circumstances. Commutable at any time provided a pro-rated minimum payment is made.
RCV No. No.
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.
Capped defined benefit income stream Yes, if a lifetime pension commenced at any time.

Yes, if a lifetime annuity commenced before 1 July 2017


Last modified: Wednesday, July 24, 2019