Consultant clarifies technical issue with preserved benefits
While individuals who’ve met a condition of release can move their benefits into retirement phase, one consultant has stressed this does not change the character of any preserved benefits accrued after the condition of release was met.
Speaking in a podcast, The SMSF Academy’s Aaron Dunn explained that a member is considered to be retired, if an arrangement under which that member was gainfully employed has come to an end on or after the member attained the age of 60.
Where an individual has two employment arrangements that are going concurrently, and one of arrangements actually ceases, what APRA says in its guidance SPG 280 is that it still considers this to be a valid condition of release of retirement at that point in time, Mr Dunn explained.
“So [for example] an individual may be working two jobs, they may have had a role, a job maybe at the electoral commission (AEC) in addition to their primary role, and they then cease that employment with the electoral commission,” he said.
“Then that in itself, if they are over the age of 60, would mean that the benefits that they had as preserved and restricted non-preserved would be satisfying that condition of release of retirement and would become unrestricted non-preserved benefits at that time.”
Importantly, however, that in itself, he said, will not change the character of any preserved benefits that would accrue after the condition of release has occurred.
“So, the fact that they're continuing on with one or more other employments means that the contributions being made both by the employer and by the member, on the basis that they are eligible to make further contributions, will mean that they will be preserved and won't be accessible until there is a further cashing condition that is met,” he said.
“You will end up with a line in the sand so when that initial cessation of employment has occurred, that benefit can move to unrestricted, but any future contributions and benefits that will accrue will continue to accrue to the preserved benefits of that member until such a time that we actually satisfy a further cashing condition.”
Miranda Brownlee is the deputy editor of SMSF Adviser, which is the leading source of news, strategy and educational content for professionals working in the SMSF sector.
Since joining the team in 2014, Miranda has been responsible for breaking some of the biggest superannuation stories in Australia, and has reported extensively on technical strategy and legislative updates. Miranda has also directed SMSF Adviser's print publication for several years.
Miranda also has broad business and financial services reporting experience, having written for titles including Investor Daily, ifa and Accountants Daily.