Market Linked Pensions

Market Linked Pensions

Market-linked pensions were available from 20 September 2004 until 19 September 2007. They could be taken from a self managed fund. The typical advantages were:

• Depending on the member’s date of birth, access started at age 55 or the preservation age. The member did not have to wait until age-pension age.
• The term was variable between life expectancy and five years less than life expectancy. It could also have been based on a spouse’s life expectancy;
• From 1 January 2006, new pensions could be based on a life expectancy of 100 years. In addition, the calculated pension each year could be varied by + or – 10%.
• Full range of investments could be used, from fixed interest to shares;
• Upon death, the remaining capital could be paid to a beneficiary or to an estate (as a lump sum); and
• If required, a new pension could be paid on death (instead of a lump sum) but only to a dependant.

However, there were some restrictions or disadvantages. These were:

• After six months, there was no commutation right, except to transfer to another complying income stream;
• If the spouse’s life expectancy was used, then the pension had to be paid to the surviving spouse, it could be paid as a lump sum. When the spouse later dies, a lump sum could be paid to a beneficiary or to the estate; and
• Only half of the capital was excluded from the assets test by Centrelink.
• The capital would be exhausted at life expectancy.

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