Temporary reduction in minimum pension drawdown payments

The Government has extended the temporary reduction in pension minimum drawdown rates to 30 June 2023.

In response to COVID-19, the Federal Government temporarily reduced the minimum pension payment requirements for account-based pensions, transition to retirement pensions and similar products by 50% for the 2019/20, 2020/21, and 2021/22 financial years.  This measure was designed to reduce the need to sell investment assets to fund minimum drawdown requirements, providing Australians with flexibility during uncertain times 

This measure was due to expire on 30 June 2022, however, as part of the 2022/23 Federal Budget, the Government has announced this will be extended to 30 June 2023. 


Drawdown rates

The minimum amount you need to withdraw from your pension account is determined by both your age and balance as at 1 July each financial year. 

The below table highlights both the standard and temporary drawdown rates.

Age

Standard drawdown rate

Temporary drawdown rate

Under 65

4%

2%

65 to 74

5%

2.5%

75 to 79

6%

3%

80 to 84

7%

3.5%

85 to 89

9%

4.5%

90 to 94

11%

5.5%

95 and over

14%

7%
Example

Charlie is 67 years old, and as at 1 July 2022 has an allocated pension with a balance of $750,000. Under the standard drawdown rate, Charlie would need to drawdown at least 5% of his balance, which is $37,500, over the course of the financial year.  
 
However, as the temporary drawdown rates have been extended, he will only need to drawdown 2.5% of his balance, which is $18,750, over the course of the financial year.

 

Frequently asked questions

We appreciate that you may have questions about this change and what it means for your account, which is why we’ve prepared a list of frequently asked questions.

  • What happens from 1 July 2022?

    The reduced minimum amounts will be used to calculate your payments in the 2022-23 financial year. If you have told us that you want to receive the minimum each year, the reduced minimum amount will again be applied automatically from 1 July, 2022. 

    If you have told us you want to receive the maximum amount permitted for Transition to Retirement pensions, or if you are receiving a nominated amount (for example your payments are increased by the CPI rate, where your pension allows), you will continue to receive these payments.

  • I don’t want my pension payment to reduce, what can I do?

    If you opted to receive the minimum pension payment for the 2021-22 financial year, and you do not want to receive an amount lower than what you’re currently receiving, you can update your payment amount by: 

    Logging into your online account and editing your current withdrawal details on the ‘Withdrawals’ page. Please note you cannot elect an amount below the minimum payment, or 

    Downloading and completing the Pension Variation form. Return the completed form to: Mercer Super Trust - Allocated Pension Division, GPO Box 4303, Melbourne, VIC 3001.

    If you have told us you want to receive the maximum amount permitted for transition to retirement pensions, or if you are receiving a nominated amount (for example your payments are increased by the CPI rate, where your pension allows), you will continue to receive these payments and do not need to take any action. 

  • When will I see updates to my pension payment on my account?

    If you’ve opted to receive the minimum pension payment amount, the new amount for the 2022/23 financial year will be calculated on 1 July and visible in the ‘Withdrawals’ section of your online account by Monday 11 July 2022.   
     
    If you have requested a change to your payments, these updates will be reflected in your online account within 10 business days, and a confirmation letter will be sent.

Seek advice before making changes

Changes in the market and drawdown requirements may prompt you to reconsider your financial position. However, it’s important to understand how your money is invested before considering changes. If you are considering changing your pension drawdown strategy, you may want to speak to a financial adviser before taking action.  

As part of your membership, our Helpline Advice team can provide financial advice about your super fund at no additional cost. You can make an appointment with this team by calling our Helpline on 1800 671 369 between 8am-7pm (AEST/AEDT), Monday-Friday.

Disclaimer: This content has been prepared on behalf of Mercer Superannuation (Australia) Limited (‘Mercer Super’), ABN 79 004 717 533, Australian Financial Services Licence #235906, the trustee of the Mercer Super Trust ABN 19 905 422 981. Any advice contained in this content is of a general nature only, and does not take into account the personal needs and circumstances of any particular individual. Prior to acting on any information contained in this content, you need to take into account your own financial circumstances. Please consider the Product Disclosure Statement, Product Guide, Insurance Guide, and Financial Services Guide before making a decision about the product, or seek professional advice from a licensed, or appropriately authorised financial adviser if you are unsure of what action to take. 'MERCER' is a registered trademark of Mercer (Australia) Pty Ltd ABN 32 005 315 917. Copyright 2022 Mercer LLC. All rights reserved.