Self Managed Term Allocated Pensions

Term allocated pensions, or TAPs as they are commonly referred, are a form of pension that became available on 20 September 2004. TAPs are a hybrid of an allocated pension and complying pension - they provide the investment flexibility of an allocated pension and the RBL and Social Security benefits of a complying pension.

TAPs have also been referred to as non-commutable allocated pensions. TAPs do not allow free access to pension capital. However, as a consequence, TAPs offer members access to their higher pension RBL. This is the large appeal of TAPs. Another is that they are concessionally assessed for Centrelink purposes.

To qualify for assessment against the pension RBL, however, a member would need to apply at least 50% of their RBL assessed amount or 50% of their pension RBL (whichever is lesser) into a TAP.

As with other pensions, TAPs require at least one annual pension payment to the primary beneficiary or to a reversionary beneficiary. The pension payments are calculated by dividing:

1. the dollar amount applied into a TAP (the purchase price); or,
2. the value of the TAP as at 1 July,

by the payment factor that corresponds to the remaining term of the pension, which is:

1. the remaining life expectancy of the primary beneficiary; or,
2. reversionary beneficiary.

Members have the option to utilise the life expectancy of a person who is 5 years younger than themselves or 5 years younger than their nominated reversionary beneficiary.

TAPs have their own payment factors, not dissimilar to Pension Valuation Factors for allocated pensions, that coincidentally lie somewhere between the Minimum and Maximum payment factors for allocated pensions.

Therefore, and other things being equal, TAPs give rise to a faster drawdown than allocated pensions.*
(* assuming the minimum pension is selected each year)

TAPs are a valuable compliment to allocated pensions.

To commence a Term Allocated Pension, one must necessarily be eligible to receive their superannuation benefits.

Therefore, to start a TAP one would need to:

• turn age 55 AND permanently retire, intending never to work either on a part time equivalent or full time basis; or,
• turn age 60 and cease existing employment arrangements; or,
• turn age 65; or,
• become totally or permanently disabled; or
• die.

Unrestricted Benefits are benefits not subject to these preservation rules. A person may start a term allocated pension with their unrestricted benefits at any time.

Under our administration service, should you wish commence a term allocated pension, we will:

• Determine your eligibility to receive such a payment;
• Calculate the benefits that are available to be taken as a term allocated pension;
• Calculate the amount required to be applied to the TAP to be eligible to be assessed against the pension RBL;
• Assist you in determining the Components used to pay the pension;
• Calculation your first and subsequent year payment amounts;
• Calculated your first and subsequent year Deductible Amounts;
• Calculate yearly rebatable amounts;
• Notify the Reasonable Benefit Limit Unit of the ATO;
• Prepare Trustee Minutes;
• Prepare member payment request documents;
• Register the Fund for PAYG Withholding;
• Prepare and issue PAYG Payment Statements and Summaries;
• Assist with Centrelink enquiries, if necessary;
• Ensure that payments are made to you on either a monthly, quarterly or yearly basis; and
• Withhold tax to be deducted from the pension payments and forward to the ATO when due.

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