Explanatory Statement

Issued by the authority of the Assistant Treasurer

Explanatory Statement

Retirement Savings Accounts Act 1997

Retirement Savings Accounts Regulations (Amendment)

The Retirement Savings Accounts Act 1997 (the Act) and the Retirement Savings Accounts Regulations (the Principal Regulations) allow banks, building societies, credit unions and life insurance companies to provide superannuation without a trust structure in the form of retirement savings accounts (RSAs), and provides for the functional supervision of RSAs and RSA providers by the Insurance and Superannuation Commission.

Section 200 of the Act provides that the Governor-General may make Regulations for the purposes of the Act.

The Regulations are necessary to amend the Principal Regulations in order to introduce a new system of preserving superannuation benefits in RSAs. Preservation is the requirement under which a person's benefit is retained in a regulated superannuation fund, approved deposit fund or RSA until retirement on or after the attainment of the superannuation preservation age (currently 55 years). The superannuation preservation age is the age at which a fund member or RSA holder may obtain access upon retirement to accumulated benefits that have been preserved.

This new system, announced by the Treasurer in the 1997-98 Budget, will improve and simplify the preservation rules by requiring that, from 1 July 1999, all contributions made by or on behalf of an RSA holder be preserved on entry to an RSA. All earnings of RSAs from that date will also be preserved. (Refer to Regulations 6, 7, 8, 9, 10, 18 and 19).

The method of determining non-preserved benefits is also simplified by 'grandfathering' the amount of an RSA holder's non-preserved benefits as at 1 July 1999. This will overcome administrative problems associated with the method of determining non-preserved benefits that is currently prescribed in the Principal Regulations to take effect from 1 July 1998. (Refer to Regulations 3, 4, 5, 11, 12, 13, 14, 15 and 16).

The Regulations also gradually increase the superannuation preservation age (which is currently 55 years) from 2015, so that by 2024 it will be 60 years. This measure was also announced by the Treasurer in the 1997-98 Budget. This will have the effect of retaining many people's superannuation benefits in the superannuation system for a longer period than is currently the case, and is consistent with the Government's retirement income policy, (Refer to Regulation 3).

The Regulations are described in detail in the Attachment.

The Regulations will commence on 30 June 1998.

ATTACHMENT

Regulation 1 - Commencement

Regulation 1 provides that these Regulations will commence on 30 June 1998.

Regulation 2 - Amendment

Regulation 2 provides that the Retirement Savings Accounts Regulations (the Principal Regulations) are amended as set out in these Regulations.

Regulation 3 - Regulation 4.01 (Interpretation)

Regulation 3 makes a number of amendments to regulation 4.01 of the Principal Regulations as a result of the introduction of the new preservation arrangements which will have effect from 1 July 1999, and also as a result of the gradual increase in the preservation age from 55 years to 60 years.

Part 4 of the Principal Regulations prescribes the payment standards in relation to retirement savings accounts (RSAs). At present, there are two different preservation systems prescribed in Part 4:

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the system that applied from the date of approval of the RSA provider (which must have beer! later than 1 June 1997) until the 'RSA changeover day'. Under this system, the types of benefits that make up preserved benefits and unrestricted non-preserved benefits are defined, with restricted non-preserved benefits being the residual amount of the RSA holder's benefits in the RSA; and

•

the system that applies from the 'RSA changeover day' (for most, if not all, RSAs, and but for these Regulations, this would be 1 July 1998). Under this system, the types of benefits that make up restricted non-preserved benefits and unrestricted non-preserved benefits are defined, with preserved benefits being the residual amount of the RSA holder's benefits in the RSA.

The preservation arrangements that are to apply from 1 July 1999 will also define the amount of an RSA holder's restricted non-preserved benefits and unrestricted non-preserved benefits, with preserved benefits being the residual amount of the RSA holder's benefits in the RSA. However, the method of defining these restricted non-preserved benefits and unrestricted non-preserved benefits will be different than under the 'RSA changeover day' system.

As no RSA provider had implemented the 'RSA changeover day' system in respect of the RSAs which it provides before the commencement of these Regulations, it has been decided that no RSA provider should have to incur unnecessary administration costs to implement this system in 1998 and then make further administrative changes to implement the 1 July 1999 preservation system. Therefore, these Regulations ensure that the 'RSA changeover day' system will not have to he implemented by RSA providers.

1. Subregulation 3.1 omits the definitions of 'RSA changeover day' and 'restricted non-preserved contributions' from subregulation 4.01(2).

The omission of the definition of 'RSA changeover day' is being done because RSAs will be subject to the same 1 July 1999 preservation system as regulated superannuation funds and approved deposit funds, and will not be required to implement the 'RSA changeover day' system that was intended to operate (for most, if not all, RSAs) from 1 July 1998. As no RSA provider had implemented the 'RSA changeover day' system in respect of the RSAs which it provides before the commencement of these Regulations, the term 'RSA changeover day' is no longer required.

The omission of the definition of 'restricted non-preserved contributions' is a consequential amendment arising from the amendment of Principal Regulation 4.10 by Regulation 12 of these Regulations. The term 'restricted non-preserved contributions' is only used in the existing Principal Regulation 4.10, which prescribed the calculation of restricted non-preserved benefits on or after the 'RSA changeover day'. Because this 'RSA changeover day' will never occur, the term 'restricted non-preserved contributions' is no longer used in regulation 4.10, and therefore there is no need to retain the definition of this term.

2. Subregulation 3.2 inserts the definition of 'preservation age' into subregulation 4.01(2). The superannuation preservation age is the age at which a fund member or RSA holder may obtain access upon retirement to accumulated benefits that have been preserved. This definition prescribes the gradual increase in the preservation age that was announced in the 1997-98 Federal Budget. The effect of this definition will see the preservation age rise gradually over a period of 10 years from 55 years of age in 2015 to 60 years of age on 1 July 2024.

3. Subregulation 3.3 amends subregulation 4.01(3) of the Principal Regulations as a consequence both of the omission of the definition of 'restricted non-preserved contributions' from subregulation 4.01(2) (see subregulation 3.1 of these Regulations for details), and also from the use of the term 'undeducted contributions' in paragraph 4.04(b).

4. Subregulations 3 -4, 3.5 and 3.6 make amendments to paragraphs 4.01(4)(a) and 4.01(5)(b) and subparagraph 4.01(5)(b)(i) respectively of the Principal Regulations. These amendments are necessary to implement the increase in the 'preservation age', which is given effect by subregulation 3.2 of these Regulations (see point 2 above).

The amendment made to paragraph 4.01(4)(a) makes provision for the eventual replacement of the 'first' retirement age (currently 55 years) under the two-tiered retirement age system in accordance with the gradual increase in the 'preservation age' (inserted by subregulation 3.2 of these Regulations - see point 2 above). The eventual effect of this increase in the preservation age will be that from 1 July 2024, there will be only one retirement age: that is. 60 years. From this date, there will be only one requirement for retirement to occur: that is, that an arrangement under which the RSA holder was gainfully employed has come to an end on or after the RSA holder has reached 60 years of age.

Subregulation 4.01(5) currently sets out tests under which a person is taken to be in 'severe financial hardship'. If an RSA holder satisfies one of the tests of 'severe financial hardship', they may apply to the RSA provider for release of part or all of their preserved benefits or restricted non-preserved benefits. One of these tests is based on the current 'preservation age' of 55 years.

The amendments made to paragraph 4.01(5)(b) and subparagraph 4.01(5)(b)(i) increase the ages specified in these provisions in line with the increase in the preservation age. For example, and subject to the other requirements of subregulation 4.01(5), the 'age-based' test for 'severe financial hardship' for a person who was born on 1 July 1961 will be:

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where the person is aged at least 57 years and 39 weeks - that they have received Commonwealth income support for a cumulative period of 39 weeks after turning 57 years of age.

5. Subregulations 3.7 and 3.8 amend subregulation 4.01(6) of the Principal Regulations, These amendments are consequential to the omission of the definition of 'restricted non-preserved contributions' from subregulation 4.01(2) (see subregulation 3.1 of these Regulations for details).

Regulation 4 - Regulation 4.02 (Operating standards)

Regulation 4 omits regulation 4.02 from the Principal Regulations.

The reason for the omission is because regulation 4.03 is being replaced by a new provision (see Regulation 5 of these Regulations). In this new regulation 4.03, because there is no longer any 'RSA changeover day' (see above in subregulation 3.1 of these Regulations for an explanation), there is no longer any need for the requirement prescribed in the existing subregulation 4.03(3) for the RSA provider to record in writing any decision to fix the RSA changeover day. Because the operating standard in existing subregulation 4.03(3) has been deleted, there is no longer any need for regulation 4.02.

Regulation 5 - Regulation 4.03 (RSA changeover day)

Regulation 5 omits the existing regulation 4.03 from the Principal Regulations, and replaces it with a new regulation 4.03. The existing regulation 4.03 allows an RSA provider to fix an RSA changeover day in respect of an RSA holder. The reason for its replacement is that it is intended that the 'RSA changeover day' system will not be implemented, and therefore there is no need for the existing regulation 4,03.

The new regulation 4.03 helps to ensure that the 'RSA changeover day' system will not be implemented by RSA providers. It provides that a decision by an RSA ' provider to fix an 'RSA changeover day' in the 1998 calendar year under the Principal Regulations that were in force before the commencement of these Regulations is taken never to have been made.

Regulation 6 - Regulation 4.04 (Preserved benefits - before 1 July 1999)

Regulation 6 makes two amendments to regulation 4.04 of the Principal Regulations.

First, the references to Principal Regulations 4.06 and 4.07 are removed, because these provisions are being removed by Regulations 8 and 9 of these Regulations. This is because there will no longer be any 'RSA changeover day', and therefore any provision that dealt with this term is no longer necessary. It is also being done for the purposes of simplification, as Principal Regulation 4.08 caters for the situations dealt with in these provisions.

Regulation 6 also replaces all references to "RSA changeover day" in regulation 4.04 with "1 July 1999". This ensures that regulation 4.04 will be used to define the preserved benefits of RSA holders in RSAs until 30 June 1999. Thereafter, preserved benefits will be defined in regulation 4.05 (as amended by Regulation 7 of these Regulations).

It should be noted that regulation 4.04 is subject to regulations 4.08 and 4.14 and Subdivision 4.1.5 of the Principal Regulations.

Regulation 7 - Regulation 4.05 (Preserved benefits - on and after 1 July 1999)

Regulation 7 amends regulation 4.05 of the Principal Regulations, by replacing all references to "RSA changeover day" with "1 July 1999". This ensures that regulation 4.05 will be used to define an RSA holder's preserved benefits in an RSA at any time on or after 1 July 1999, which is the start of the new preservation arrangements.

Regulation 4.05 now calculates an RSA holder's preserved benefits in an RSA at any time on or after 1 July 1999 as the RSA holder's total benefits less the sum of

•

the amount of the RSA holder's restricted non-preserved benefits in the RSA, as defined by new regulation 4.10 of the Principal Regulations -(see Regulation 12 of these Regulations); and

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the amount of the RSA holder's unrestricted non-preserved benefits in the RSA, as defined by regulation 4.13 of the Principal Regulations (see Regulation 15 of these Regulations for amendments made to regulation 4.13).

In other words, as an RSA holder's restricted non-preserved benefits and unrestricted non-preserved benefits are defined on and after 1 July 1999, an RSA holder's preserved benefits in an RSA at any time on or after 1 July 1999 is a residual amount

Regulation 4.05 does not directly state that all contributions made, and all earnings accumulated in respect of the period, on and after 1 July 1999 are preserved benefits. However, became these contributions and earnings are not included in the definitions of an RSA holder's restricted non-preserved benefits and unrestricted non-preserved benefits on and after 1 July 1999, and because the RSA holder's preserved benefits in an RSA at any time on or after 1 July 1999 is a residual amount these contributions and earnings are included in the RSA holder's preserved benefits. Of course, benefits which were preserved benefits before 1 July 1999 will remain preserved benefits until a condition of release is satisfied in respect of those benefits.

It should be noted that regulation 4.05 is subject to regulation 4.14 and Subdivision 4.1.5 of the Principal Regulations.

Regulation 8 - Regulation 4.06 (Preserved benefits - rollover or transfer from regulated superannuation funds during 1997 or 1998)

Regulation 8 omits regulation 4.06 from the Principal Regulations.

The reason for its omission is that it is no longer necessary. Regulation 4.06 catered for situations where a person's preserved benefits were transferred or rolled over from a regulated superannuation fund where they had a 'SIS changeover day' to an RSA where they have not had an 'RSA changeover day', and ensured that these benefits retained their preserved benefit character. Because the 'RSA changeover day' will never occur as a result of amendments made by subregulation 3.1 and Regulation 5 of these Regulations, regulation 4.06 is no longer necessary and it is therefore deleted.

Regulation 9 - Regulation 4.07 (Preserved benefits - rollover or transfer between RSAs during 1998)

Regulation 9 omits regulation 4.07 from the Principal Regulations.

The reason for its omission is that it is no longer necessary. Regulation 4.07 catered for situations where a person's preserved benefits were transferred or rolled over from an RSA where they had an 'RSA changeover day' to an RSA where they have not had an 'RSA changeover day', and ensured that these benefits retained their preserved benefit character. Because the 'RSA changeover day' will never occur as a result of amendments made by subregulation 3.1 and Regulation 5 of these Regulations, regulation 4.07 is no longer necessary and it is therefore deleted.

Regulation 10 - Regulation 4.08 (Effect of rollover or transfer on preserved benefits)

Regulation 10 amends regulation 4.08 of the Principal Regulations by making it subject to Subdivision 4.1.5 as well as to regulation 4.14.

Regulation 11 - Regulation 4.09 (Restricted non-preserved benefits - before 1 July 1999)

Regulation 11 makes two amendments to regulation 4.09 of the Principal Regulations.

First, the reference to Principal Regulation 4.11 is omitted by subregulation 11.1, because this provision is omitted by Regulation 13 of these Regulations. This omission is being mainly done because there will he no longer any 'RSA changeover day', and therefore any provision that dealt with this term is no longer necessary. It should be noted that the existing Principal Regulation 4.12 is being replaced with a new provision (see Regulation 14 of these Regulations), which deals with the effect of the rollover or transfer of restricted non-preserved benefits,

Subregulation 11.2 also replaces all references to "RSA changeover day" with "1 July 1999". This ensures that regulation 4.09 will be used to define the restricted non-preserved benefits of RSA holders in RSAs until 30 June 1999. Thereafter, restricted non-preserved benefits will be defined in regulation 4.10 (as amended by Regulation 12 of these Regulations).

Regulation 4.09 now calculates an RSA holder's restricted non-preserved benefits in an RSA before 1 July 1999 as the RSA holder's total benefits less the sum of.,

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the amount of the RSA holder's preserved benefits in the RSA, as defined by regulation 4.04 of the Principal Regulations (see Regulation 6 of these Regulations for amendments made to regulation 4.04); and

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the amount of the RSA holder's unrestricted non-preserved benefits in the RSA, as defined by regulation 4.13 of the Principal Regulations (see Regulation 15 of these Regulations for amendments made to regulation 4.13).

It should be noted that regulation 4,09 is subject to regulations 4.12 and 4.14 and Subdivision 4.1.5 of the Principal Regulations.

Regulation 12 - Regulation 4.10 (Restricted non-preserved benefits - on and after RSA changeover day)

Regulation 12 omits the existing regulation 4.10 from the Principal Regulations, and replaces it with a new regulation 4.10 titled "Restricted non-preserved benefits - on and after 1 July 1999".

The existing regulation 4.10 is deleted because it is no longer necessary as the 'RSA changeover day' will not occur as a result of amendments made by subregulation 3.1 and Regulation 5 of these Regulations, and also because a new method of calculating an RSA holder's restricted non-preserved benefits in an RSA will apply from 1 July 1999.

1. This new regulation 4.10, in subregulation 4.10(1), calculates an RSA holder's restricted non-preserved benefits in an RSA at any time on or after 1 July 1999 as the sum of:

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the amount of the RSA holder's restricted non-preserved benefits in the RSA as at 30 June 1999, as calculated by Principal Regulation 4.09 (as amended by Regulation 11 of these Regulations); and

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the amount of the RSA holder's restricted non-preserved benefits received from another RSA, a regulated superannuation fund or an exempt public sector superannuation scheme on and after 1 July 1999.

This means that on and after 1 July 1999, an RSA holder's restricted non-preserved benefits cannot be added to by any type of contributions made to the RSA on behalf of the RSA holder, or by any investment earnings that have accumulated on an RSA holder's benefits in respect of the period on and after 1 July 1999. From 1 July 1999, all benefits arising from contributions made from that date, and investment earnings accumulating on restricted non-preserved benefits in respect of the period on and after 1 July 1999, will be required to be preserved by virtue of the effect of regulation 4.05 (as amended by Regulation 7 of these Regulations). Of course, benefits which were restricted non-preserved benefits before 1 July 1999 will remain restricted non-preserved benefits until a condition of release is satisfied in respect of those benefits.

It should be noted that the new regulation 4.10 is subject to regulations 4.12 and 4.14 and Subdivision 4.1.5 of the Principal Regulations.

2. The new regulation 4.10 also, in new subregulation 4.10(2), provides for the retrospective changing of the preservation status of benefits arising from RSA holder contributions for which a deduction is later claimed.

Section 82AAT of the Income Tax Assessment Act 1936 (the Tax Act) allows self-employed or substantially self-employed persons to claim a deduction for personal contributions (ie, RSA holder contributions) made to an RSA at any time after the contributions have been made. When this occurs, these contributions are classified in the RSA as deducted contributions for taxation purposes, with a subsequent 'reclassification' of benefits from the restricted non-preserved benefits category (ie, where the contribution was originally allocated) to the preserved benefits category. This is because benefits arising from personal contributions for which a deduction has been claimed must currently be preserved.

To ensure that benefits arising from the above circumstances are also preserved under the preservation arrangements that will apply from 1 July 1999, new subregulation 4.10(2) provides that if

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on or after 1 July 1999, when a deduction is allowed for an RSA holder under section 82AAT of the Tax Act in respect of an RSA holder contribution made before 1 July 1999; and

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the benefits arising from the contribution were initially allocated to restricted non preserved benefits;

these benefits will be reclassified as preserved benefits from the date of the deduction.

This provision would only apply in limited circumstances: that is, in respect of RSA holder contributions made before 1 July 1999 by self-employed or substantially self-employed persons for which they are allowed a deduction under section 82AAT of the Tax Act.

It should be noted that any benefits arising from RSA holder contributions made on or after 1 July 1999 are required to be preserved under regulation 4.05 of the Principal Regulations (as amended by Regulation 7 of these Regulations).

Regulation 13 - Regulation 4.11 (Restricted non-preserved benefits - rollover or transfer from regulated superannuation funds during 1997 or 1998)

Regulation 13 omits regulation 4.11 from the Principal Regulations.

The reason for its omission is that it is no longer necessary. Regulation 4.11 caters for situations where a person's restricted non-preserved benefits were transferred or rolled over from a regulated superannuation fund where they had a 'SIS changeover day' to an RSA where they have not had an 'RSA changeover day', and ensured that these benefits retained their restricted non-preserved benefit character. Because the 'RSA changeover day' will never occur as a result of amendments made by subregulation 3 .1 and Regulation 5 of these Regulations, regulation 4.11 is no longer necessary and it is therefore deleted.

Regulation 14 - Regulation 4.12 (Restricted non-preserved benefits - rollover or transfer between RSAs during 1998)

Regulation 14 omits regulation 4,12 from the Principal Regulations and replaces it with a new regulation 4.12, entitled "Effect of rollover or transfer on restricted non-preserved benefits". The new regulation 4.12 provides that an RSA holder's benefits in an RSA which were restricted non-preserved benefits in the source from which they were received continue to be restricted non-preserved benefits in that RSA.

The circumstance that is dealt with in the existing regulation 4.12 is where a person's restricted non-preserved benefits were transferred or rolled over from an RSA where they had an 'RSA changeover day" to an RSA where they have not had an 'RSA changeover day'. In these circumstances, these benefits retained their restricted non-preserved benefit character, despite the methods of calculating restricted non-preserved benefits being different between the two RSAs.

Because the 'RSA changeover day' will never occur as a result of amendments made by subregulation 3.1 and Regulation 5 of these Regulations, regulation 4.12 is no longer necessary and it is therefore replaced with the new regulation 4.12. The new regulation 4.12 caters for any rollover or transfer of restricted non-preserved benefits to an RSA from any source (for example, another RSA, a regulated superannuation fund or an exempt public sector superannuation scheme).

It should be noted that the new regulation 4.12 is subject to regulation 4.14 and Subdivision 4.1.5 of the Principal Regulations.

Regulation 15 - Regulation 4.13 (Unrestricted non-preserved benefits)

Regulation 15 makes two changes to regulation 4.13 of the Principal Regulations.

1. Subregulation 15.1 amends paragraph 4.13(1)(d) of the Principal Regulations in order to provide that only investment earnings that have accumulated on unrestricted non-preserved benefits in RSAs in respect of the period before 1 July 1999 will be able to be included in unrestricted non-preserved benefits from that date. Any benefits arising from investment earnings that accumulate on unrestricted non-preserved benefits in respect of the period from 1 July 1999 will be required to be preserved by virtue of the effect of regulation 4.05 (as amended by Regulation 7 of these Regulations).

2. Subregulation 15.2 inserts a new subregulation 4.13(3) to provide for the retrospective changing of the preservation status of benefits arising from RSA holder contributions for which a deduction is later claimed.

Section 82AAT of the Income Tax Assessment Act 1936 (the Tax Act) allows self-employed or substantially self-employed persons to claim a deduction for personal contributions (ie, RSA holder contributions) made to an RSA at any time after the contributions have been made. When this occurs, these contributions am classified in the RSA as deducted contributions for taxation purposes, with a subsequent 'reclassification' of benefits from the restricted non-preserved benefits category (ie, where the contribution was originally allocated) to the preserved benefits category. This is because benefits arising from personal contributions for which a deduction has been claimed must currently be preserved.

Before the deduction is claimed, it could be possible for a condition of release to be satisfied in respect of the restricted non-preserved benefits under subregulation 4.14(2), with these benefits becoming unrestricted non-preserved benefits. However, when the deduction is claimed, these unrestricted non-preserved benefits would be reclassified as preserved benefits,

To ensure that benefits arising from the above circumstances are also preserved under the preservation arrangements that will apply from 1 July 1999, new subregulation 4.13(3) provides that if.

•

on or after 1 July 1999, when a deduction is allowed for an RSA holder under section 82AAT of the Tax Act in respect of an RSA holder contribution made before 1 July 1999, and

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the benefits arising from the contribution were initially allocated to restricted non preserved benefits and then allocated to unrestricted non-preserved benefits under subregulation 4.14(2);

these benefits will be reclassified as preserved benefits from the date of the deduction.

This provision would only apply in limited circumstances: that is, in respect of RSA holder contributions made before 1 July 1999 by self-employed or substantially self-employed persons for which they are allowed a deduction under section 82AAT of the Tax Act.

It should be noted that any benefits arising from RSA holder contributions made on or after 1 July 1999 are required to be preserved under regulation 4,05 of the Principal Regulations (as amended by Regulation 7 of these Regulations).

It should also be noted that depending on the terms and conditions of the RSA, a condition of release of the same type that led to the reallocation of restricted non-preserved benefits to unrestricted non-preserved benefits may be able to be used for the allocation of preserved benefits to unrestricted non-preserved benefits under subregulation 4.14(1). Of course, it is up to the RSA provider to determine whether this 'second' condition of release has been satisfied.

Regulation 16 - Regulation 4.16 (Indexation)

Regulation 16 omits regulation 4.16 of the Principal Regulations, because it is no longer necessary.

Regulation 4.16 provides that the benefits that are referred to in Division 4.1 of the Principal Regulations as 'indexed' may be aggregated for the purpose of that indexation. The only provision that uses the term 'indexation' is the existing Principal Regulation 4.10, which used it for the purposes of calculating an RSA holder's restricted non-preserved benefits in an RSA after the 'RSA changeover day'.

The existing regulation 4.10 is replaced by a new provision by Regulation 12 of these Regulations. This new method of calculating an RSA holder's restricted non-preserved benefits in an RSA on or after 1 July 1999 does not use indexation. As a result, regulation 4.16 is no longer necessary and is deleted.

Regulation 17 - Regulation 4.18 (Redistribution of benefits by operation of terms and conditions or action of RSA provider)

Regulation 17 amends regulation 4.18 of the Principal Regulations by replacing the references to those specific regulations that define an RSA holder's preserved benefits, restricted non-preserved benefits and unrestricted non-preserved benefits with references to the Subdivisions in which these regulations are found. These amendments remove the need to amend regulation 4.18 after 30 June 1999 in order to remove references to redundant regulations (ie, from 30 June 1999, regulations 4.04 and 4.09).

Regulation 18 - Regulation 4.21 (Voluntary cashing of preserved benefits)

Regulation 18 amends regulation 4.21 of the Principal Regulations to provide that paragraph 4.21(2)(b) has no effect after 30 June 1999. This amendment is a consequence of all investment earnings accruing from 1 July 1999 on all benefits having to be preserved.

Regulation 19 - Regulation 4.22 (Voluntary cashing of restricted non-preserved benefits)

Regulation 19 amends regulation 4.22 of the Principal Regulations to provide that paragraph 4.22(2)(b) has no effect after 30 June 1999. This amendment is a consequence of all investment earnings accruing from 1 July 1999 on all benefits having to be preserved.

Regulation 20 - Regulation 4.24 (Compulsory cashing of benefits)

Regulation 20 inserts subregulation 4.24(3A) into the Principal Regulations. This new provision requires the RSA provider of an RSA to take ongoing reasonable efforts in determining the RSA holder's ongoing employment status upon and after the RSA holder attaining age 65.

If, after reasonable efforts have been made, the RSA provider is unable to establish the RSA holder's ongoing gainful employment status, the RSA provider must presume the RSA holder's is not gainfully employed for compulsory cashing purposes, and therefore must cash the RSA holder's benefits as soon as practicable in accordance with regulation 4.24.