Government should extend temporary drawdown suspension: ING

The Federal Government should extend its temporary suspension of the minimum drawdown requirements on superannuation pensions between January and June, according to Graeme Colley, ING Australia superannuation strategy manager and technical manager for super concepts.

Describing the three-month suspension as “insufficient”, Colley said it could be “better used by extending it beyond June for another year or so when the Government reviews its decision in May”.

“If people wish to defer taking their pension for maybe another year then hopefully the markets should improve and build value back into their super funds.

"I noticed in the press release that [Superannuation and Corporate Law Minister] Nick Sherry was saying that if things are still bad in May we’ll have a look at it, and may extend that concession that’s been granted.

“We have only a few months until May comes up but if the economy is in no better condition than it is now, then you would expect that (extension) to happen," he said.

Colley’s call came a day after Sherry and Federal Treasurer Wayne Swan announced the suspension, acknowledging the significant downturn has had a negative effect on retirees’ super capital in account-based pensions.

The minimum drawdown requirements, requiring a minimum proportion of a retiree's super to be withdrawn each year to cover living costs, were part of the Simple Super tax rules introduced by the Howard Government in 2006.

Colley also said the only people who are going to benefit from yesterday’s announcement are those pensioners who have not drawn out at least half that minimum amount.

"Those who will benefit are those who have drawn down a pension on yearly basis and maybe those who haven’t needed the money (to live on) in pension phase so far and were thinking of drawing it out (but don't really need that money now),” he said.

“It's not going to benefit those people [who] get the pension paid weekly, not those [who] get paid fortnightly, monthly or even quarterly for their living expenses," Colley said.”