When interest rates and investment returns were depressed during the global financial crisis, the government lowered the minimum pension drawdown rates by 50 per cent, before restoring them in 2013/2014.
However, the SMSF Owners’ Alliance (SMSFOA) believes that given the current economic and interest rate environment, the time is right for the government to again consider lowering the mandatory superannuation pension.
SMSFs typically hold a relatively large proportion of their assets in cash, SMSFOA said, with the concentration of cash particularly pronounced in smaller funds.
“Smaller funds (less than $200,000) hold 45 per cent or more of their assets in cash; the average fund ($1-2 million) hold 33 per cent in cash,” the group stated.
“With $156 billion held in cash by SMSFs, each 0.25 per cent reduction in interest rates reduces overall SMSF earnings by $390 million.
“Compounding the effect of low interest rates on fund earnings, it is likely that, in time, dividends from listed companies will be lower given the general slowdown in economic activity in Australia,” SMSFOA said.