Govt called on for legacy pension amnesty
An SMSF services provider says the government should consider introducing an amnesty for those with restrictive legacy pensions, with some clients unable to wind down their SMSF and access capital for aged care.
Heffron SMSF Solutions head of customer Meg Heffron said many professionals in the SMSF industry would like to see a simpler way for clients to get out of legacy pensions, which have been further complicated by the super reforms.
“We’ve got plenty of cases where we’ve got really old clients who’ve been in these pensions for 15 years. The amounts are small now and if they were able to do what they wanted, they’d wind up their SMSF and use the capital to move into aged care but they can’t because they’re tied up,” Ms Heffron explained.
Ms Heffron said she would like to see the government introduce some kind of amnesty to make it easy for members to unwind these old pensions and get rid of the reserves.
“What would be great if the government said that everyone who has one of these pensions can just move it to an account-based pension and everyone who has a reserve can just allocate it to one of the members in the fund without having to worry about any tax consequences,” she said.
“At the moment, if you allocate a large amount from somebody’s reserve to their accumulation account, there’s a risk that it will be checked against their concessional contribution cap, and so there’s potentially a big excess there.”
While there would be fewer than 10,000 of these pensions left or even less, she said, the people that are affected by these pensions are impacted very profoundly.
“Often, people look at these pensions and think that only very wealthy people have them and that they’re a tax planning tool, and that’s true, some of the people who’ve got them have had very large super balances. But equally there are some people who’ve got them who have very small balances,” she said.
“However, because they’re locked into these things, they basically have to die to get access to their capital again.”