Sandra has received some bad news in the mail about her pension payments being halved and wants to know what she can do about it.
Q. Sandra
I am a retired 70-year-old woman. I have an allotted super pension and receive a small amount from the government. I received my super statement and it says that I will be given 50 per cent of what I usually get. I cannot live on $11,500 a year. Can I ask to receive my full amount? Otherwise, how does the government expect me to make up the shortfall?
A. The government reduced the minimum annual payment required for account-based pensions and annuities, allocated pensions and annuities and market-linked pensions and annuities by 50 per cent for the 2019-20 and the 2020-21 financial years due to the significant losses in financial markets as a result of the COVID-19 pandemic.
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The government announced the change in March last year to provide retirees with more flexibility when markets were volatile.
The change allowed retirees to choose to leave more of their retirement savings invested over a longer period, which allowed them to keep more funds in their account as markets recovered from the pandemic.
This measure was also put in place during the global financial crisis.
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The minimum payment amount from an account-based pension is a percentage of the income account balance at the start of the financial year, or the date your income account started.
If you want to make changes to your regular account-based pension payments, you can choose to receive a:
Specified amount. Set payments at a specified amount above the temporary minimum. This could help provide certainty for budgeting.
Reduced minimum. Apply to reduce your income account payments to the new minimum payment amounts. Some super funds automatically applied the 50 per cent reduction for the 2020-21 financial year, which sounds as though it was the case in your situation.
Non-reduced minimum. Continue to receive the payments at the rate you have been receiving them prior to the change taking effect. If you are receiving the minimum pension payment this change needs to be made before the first July payment for it to apply for the 2020-21 financial year with some super funds, which means it may be too late in your situation.
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If you have missed the boat on changing you pension payment, you should contact your provider and discuss what options are available to you as you should have received notification of the change.
Did you check your super statement and receive a shock about your payments this year?
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