Increase in the Super Preservation Age
Attaining preservation age is a key milestone in order to access your superannuation benefits. Broadly, the preservation age is a legislated minimum age requirement, before which a pension cannot be commenced.
In recent times, the “magic age” for accessing a pension from your superfund has been 55 years of age. However, from 1 July 2015 this age will be gradually increased to 60 years of age, depending on your date of birth. The table below summarises the transition:
Whilst these changes have been known for some time, it is important to be conscious of how the change in the preservation age can impact your retirement planning strategy. For example, a member of a superannuation fund who turns 55 between 1 July 2015 and 30 June 2016 cannot start a transition to retirement pension during the 2016 fiscal year.
It is important that both members and the trustees of funds (particularly Self Managed Superannuation Funds) are aware of the age in which a superannuation benefit can be accessed, as the trustee and member may face severe penalty for commencing a pension stream prior to the preservation age being attained.
In an environment that is constantly changing, the preservation age may be something that is further adjusted in the future as a measure to keep Australians in the workforce for longer. The Federal Government has previously canvassed the idea that the preservation age should be linked to the aged pension (i.e. government pension), which is most likely to be the aged pension age less five years. If this were to go ahead, the preservation age to access your own superannuation monies would increase to 62 by 2023 and to 65 by 2035 where the aged pension age is proposed to increase to 70.
As with all aspects of your retirement and estate planning, it is important that you have the current information and act on professional advice. If you have any queries on the increase to the preservation age or your superannuation generally, please do not hesitate to contact your ESV Partner on 9283 1666.
Article by Geoff Tierney