Explanatory Statement
Issued by the authority of the Minister for Superannuation and Corporate LawSuperannuation Industry (Supervision) Act 1993
Superannuation Industry (Supervision) Amendment Regulations 2009 (No. 2)
Retirement Savings Accounts Act 1997
Retirement Savings Accounts Amendment Regulations 2009 (No. 2)
Subsection 353(1) of the Superannuation Industry (Supervision) Act 1993 (SIS Act) provides, in part, that the Governor-General may make regulations prescribing matters required or permitted by the SIS Act to be prescribed, or necessary or convenient to be prescribed, for carrying out or giving effect to the SIS Act.
Subsection 200(1) of the Retirement Savings Accounts Act 1997 (RSA Act) provides, in part, that the Governor-General may make regulations prescribing matters required or permitted by the RSA Act to be prescribed, or necessary or convenient to be prescribed for carrying out or giving effect to the RSA Act.
It is a requirement that a minimum payment be made from a superannuation account-based pension at least annually. Minimum payments are determined by age and the value of the account balance as at 1 July each year. The minimum annual payment rule is designed so that retirees draw down on their superannuation capital over their retirement. This rule recognises that superannuation is a retirement savings vehicle with substantial tax concessions.
The purpose of the Regulations is to give effect to the Government's announced decision to halve the minimum annual payment amounts for account-based pension products for the 2008-09 financial year.
The reduction in the minimum payment amounts for 2008-09 applies to account-based annuities and pensions, allocated annuities and pensions, and market-linked annuities and pensions.
This temporary measure addresses concerns that the minimum payment amounts for the current year were set on the basis of account balances at 1 July 2008, when equity values were significantly higher.
The Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations), inter alia, contain the payment rules for annuities and pensions, including those products in relation to which there is an account balance attributable to the recipient.
The Retirement Savings Accounts Regulations 1997 (RSA Regulations), inter alia, contain the payment rules for pensions payable from Retirement Savings Accounts.
The Regulations halve the minimum annual payment amounts for account-based, allocated and market-linked annuities and pensions, and for pensions payable from Retirement Savings Accounts, for the 2008-09 financial year.
Details of the amendments to the SIS Regulations are set out in Attachment A and details of the amendments to the RSA Regulations are set out in Attachment B.
The Regulations are legislative instruments for the purposes of the Legislative Instruments Act 2003.
The Regulations commence on the day after they are registered on the Federal Register of Legislative Instruments.
Due to the urgency attaching to the release of these Regulations, public consultation was not feasible.
Authority:
Subsection 353(1) of the Superannuation Industry (Supervision) Act 1993.
Subsection 200(1) of the Retirement Savings Accounts Act 1997.
ATTACHMENT A
Details of Superannuation Industry (Supervision) Amendment Regulations 2009 (No. 2)
Regulation 1 specifies the name of the Regulations as the Superannuation Industry (Supervision) Amendment Regulations 2009 (No. 2).
Regulation 2 provides that the Regulations commence on the day after registration.
Regulation 3 provides that Schedule 1 amends the Superannuation Industry (Supervision) Regulations 1994 (SIS Regulations).
Schedule 1 Amendments
Items 1 and 3
Schedules 1A and 1AAB set out the method for calculating the minimum and maximum payment limits for allocated pensions (and for the equivalent annuity product). Clause 2 of these schedules sets out the method for calculating the minimum payment limits. Items 1 and 3 insert into clause 2 a reference to new clause 3A. As a consequence, clause 2 becomes subject to new clause 3A.
Items 2 and 4
These items insert new clause 3A into Schedules 1A and 1AAB. The effect of new clause 3A is to halve the minimum payment limits calculated under clause 2 of these schedules for the financial year commencing 1 July 2008.
As clause 2 is also subject to clauses 3 and 4, the existing rules in these clauses in relation to pro-rating of the minimum limits in the first year of a pension and rounding of amounts continue to apply for the financial year commencing 1 July 2008.
Item 5
Schedule 6 contains the rules for calculating the annual payment amounts for a market-linked income stream. Item 5 inserts proposed new clauses 9 and 10 into Schedule 6.
Clause 1 of Schedule 6 sets out the formula for determining the annual payment amount for a market-linked income stream. Under clause 8 of this schedule, an amount is taken to have been determined in accordance with clause 1 if it is not less than 90 per cent of the amount determined in accordance with clause 1, and not greater than 110 per cent of the amount determined in accordance with clause 1. The effect of new clause 9 is that clause 8 does not apply for the 2008-09 financial year.
New clause 10 effectively replaces clause 8 for the 2008-09 financial year. Under clause 10, an amount is taken to have been determined in accordance with clause 1 if it is not less than 45 per cent of the amount determined in accordance with clause 1, and not greater than 110 per cent of the amount determined in accordance with clause 1.
Items 6 and 7
Schedule 7 contains the rules for calculating the minimum payment amount for a superannuation income stream. The method for calculating the minimum payment amount for an account-based pension (and for the equivalent annuity product) is set out in clause 1 of Schedule 7. Item 6 makes the calculation method in clause 1 subject to new clause 4A.
New clause 4A is inserted into Schedule 7 by item 7. The effect of new clause 4A is that, for the 2008-09 financial year, the minimum payment amount for an account-based pension (and the equivalent annuity product) is half the amount worked out under the formula in clause 1.
As clause 1 is also subject to clauses 3 and 4, the existing rules in these clauses in relation to payments in the first year of a pension continue to apply for the 2008-09 financial year.
ATTACHMENT B
Details of Retirement Savings Accounts Amendment Regulations 2009 (No. 2)
Regulation 1 specifies the name of the Regulations as the Retirement Savings Accounts Amendment Regulations 2009 (No. 2).
Regulation 2 provides that the Regulations commence on the day after registration.
Regulation 3 provides that Schedule 1 amends the Retirement Savings Accounts Regulations 1997 (RSA Regulations).
Schedule 1 Amendments
Items 1 and 3
Schedules 1 and 1A set out the method for calculating the minimum and maximum payment limits for allocated pensions payable from Retirement Savings Accounts. Clause 2 of these schedules sets out the method for calculating the minimum payment limits. Items 1 and 3 insert into clause 2 a reference to new clause 3A. As a consequence, clause 2 becomes subject to new clause 3A.
Items 2 and 4
Items 2 and 4 insert new clause 3A into Schedules 1 and 1A. The effect of new clause 3A is to halve the minimum limits calculated under clause 2 of these schedules for the financial year commencing 1 July 2008.
As clause 2 is also subject to clauses 3 and 4, the existing rules in these clauses in relation to pro-rating of the minimum limits in the first year of a pension and rounding of amounts continue to apply for the financial year commencing 1 July 2008.
Item 5
Schedule 4 contains the rules for calculating the annual payment amounts for a market-linked pension. Item 5 inserts new clauses 9 and 10 into Schedule 4.
Clause 1 of Schedule 4 sets out the formula for determining the annual payment amount for a market-linked pension. Under clause 8 of Schedule 4, an amount is taken to have been determined in accordance with clause 1 if it is not less than 90 per cent of the amount determined in accordance with clause 1, and not greater than 110 per cent of the amount determined in accordance with clause 1. The effect of new clause 9 is that clause 8 does not apply for the 2008-09 financial year.
New clause 10 effectively replaces clause 8 for the 2008-09 financial year. Under clause 10, an amount is taken to have been determined in accordance with clause 1 if it is not less than 45 per cent of the amount determined in accordance with clause 1, and not greater than 110 per cent of the amount determined in accordance with clause 1.
Items 6 and 7
Schedule 5 contains the rules for calculating the minimum payment amount for an account-based pension. Item 6 makes the calculation method in clause 1 of this schedule subject to new clause 3A.
Item 7 inserts new clause 3A into Schedule 5. Under new clause 3A, the minimum payment amount for the 2008-09 financial year is half the amount worked out using the formula in clause 1.
As clause 1 is also subject to clauses 2 and 3, the existing rules in these clauses in relation to payments in the first year of a pension continue to apply for the 2008-09 financial year.