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Allocated pensions are designed for people who have retired, or are approaching retirement age and want to leave their money in a super fund so that they can draw a regular income stream rather than withdrawing their money as a lump sum. With an allocated pension you can choose:
- How much you receive as income (minimum and maximum limits apply)
- To have your income credited to your account monthly, quarterly, half-yearly or yearly
You will continue to receive income payments until your superannuation and investment returns run out.
What are the tax advantages of allocated pensions?
- Tax-free investment earnings are added to your pension
- Annual tax free amount if you have a capital gains tax-exempt component or an invalidity component
- You may be entitled to a tax rebate of up to 15%
Funds that pay allocated pensions can be very tax-effective for people with a superannuation payout to invest but they impose a range of restrictions on investors. One of the more important is the rule that sets the minimum amount of pension that has to be taken each year, while also imposing a maximum limit.
Allocated pensions do have some disadvantages you should be mindful of:
- T here are restrictions on the amount of pension you can take each year
- There is no guarantee your pension payments will continue throughout your lifetime
- The investment option you choose may not perform to your expectations
- The government may change the rules about allocated pensions
- You can't split your pension to reduce tax
Book your Free Consultation online today using our simple online Enquiry Form, for more information on Allocated Pensions, or any of our financial services.
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