Superannuation is changing

The 2016-17 Budget included a number of measures that will impact superannuation pensions, including some changes that will impact IRIS members from 1 July 2017.

Transition to Retirement (TTR) members

Currently, investment earnings in pension accounts are tax-free, regardless of the type of pension.

Because Transition to Retirement (TTR) pension holders are still working and receiving contributions to their superannuation, from 1 July 2017 their investment earnings will be taxed at 15%, the same as a regular accumulation-phase super fund.

Retirement phase pensions are unaffected by the change.

Transfer Balance Cap

Currently, there is no maximum limit on the amount of assets that members can hold in pension-phase accounts.

From 1 July 2017, a Transfer Balance Cap will be introduced to restrict the total amount of superannuation that can be transferred from accumulation to pension phase to $1.6 million. Accrued super amounts above the cap will need to either stay in a super account where investment earnings are taxed or be withdrawn from super as a lump sum.

The Cap applies to the total of all pension accounts held by a person across all financial institutions.

Current pension account holders can have a maximum of $1.6 million invested in their combined pension accounts as at 30 June 2017, otherwise tax penalties will apply. Future earnings that may push balances above the Cap after 30 June 2017 are exempt from this requirement. Members with invested pension balances above the Cap will need to roll money back to a super fund account or cash out lump sums down to the Cap amount before 30 June 2017. Some transitional relief is available for amounts over the Cap of less than $100,000.

Term Allocated Pensions (TAPs) are not able to be varied or commuted like a typical super income stream pension. For these accounts and other lifetime pensions such as defined benefit accounts, a modified valuation calculation will apply. For TAPs, the ‘special value’ calculation is based on the amount of your annual entitlement and the number of years left in the product. Rather than forced cashing of amounts above the Cap, additional tax will apply.

Impact on IRIS members

IRIS will be closed to new members from 1 July 2017.

IRIS has directly consulted with all members who we have identified as being potentially affected by the upcoming changes and also assessed the impact that these changes require to our systems.

As you know, IRIS has always been dedicated to providing its members with high quality, low cost retirement solutions. As a small fund of fewer than 3,300 members and an aging demographic, we’ve been weighing up how to best deliver our services while still maintaining our commitment to keeping costs low.

That’s why we have made the decision to stop accepting new members after 30 June 2017. Service delivery to existing members will continue uninterrupted.

What you need to do

Some IRIS members may hold other accounts outside of their IRIS pension. If you have pension accounts in more than one fund and may be at risk of breaching the new transfer cap, we strongly recommend you seek financial advice. The ATO will write to all Australians with existing pension accounts who may be affected by the change.



Last updated on 16th August 2017