Lump sum payments continue to climb under super reforms

Benefit payments from SMSFs have seen a significant drop following the introduction of the transfer balance cap, with the latest SuperConcepts survey indicating payments dropped from $50,313 in the June 2017 quarter down to $22,289 in June quarter this year.

SuperConcepts executive manager of SMSF technical and strategic services Phil La Greca said this reflects the significant impact of the legislative changes that applied from 1 July 2017 where the capital value of pension accounts was limited to $1.6 million which resulted in a lower level of pension payments being required to be paid.

“Nevertheless, some clients still required the same level of cash from their SMSFs so that meant rather than deplete pension accounts by drawing additional payments above the statutory minimum level, they elected to take those amounts out as lump sum payments out of their accumulation accounts,” Mr La Greca explained.

“In some cases where there is no accumulation account, these additional payments were still classified as lump sums from a pension account to improve the client’s transfer balance account position.”

The survey, which comprised 2,600 SMSFs, also indicated that out of all the benefit payments, 79 per cent of withdrawals were pension payments and 21 per cent were lump sum payments.

“The proportion of lump sum payments has progressively increased throughout the year from 10 per cent of all payments as minimum pension levels have been attained,” said Mr La Greca.

In the March quarter, the survey indicated that lump sums accounted for 19 per cent of payments while pension payments accounted for 81 per cent of payments.

“This reflects the benefits of professional advice where they understand the impacts of taking pensions versus commutations,” says Mr La Greca.

The survey also shows that average quarterly contributions increased from $3,498 to $8,623, which could reflect the change in rules allowing members to make personal contributions.

“This was a positive rule change that SMSF trustees have embraced with gusto because it was only ever available to the self-employed,” said Mr La Greca.