What happens when you retire…

When you retire, your DIY Super fund can pay you a Lump sum or a Pension. A lump sum is more flexible than a Pension benefit. The beneficiary can choose to use the money to purchase an immediate annuity, repay existing debts, invest the entire balance or spend the money on consumer items.

Many recipients of lump sums are not accustomed to investing money. Therefore they often lack the necessary skills to invest the funds and may often make poor or uninformed investment decisions.

If you choose the Pension path from your DIY Super Fund, the member has to continue investing money to draw an Income stream from the Super Fund.

You can also start a Pension benefit with the view & option to commute (finish – break) the Pension benefit and take out the balance as a lump sum. A lump sum payment or a pension benefit (both) may run out if a member lives for a long time or if there is not enough money at retirement or if the investment return is lower than Pension withdrawal.

Opting for Pension path minimises the possibility of a member double dipping, i.e. spending their lump sum quickly or commuting their pension and then relying on the old age pension for support

Generally members with high Fund balances choose the Pension path due to tax relief (15% rebates up to the persons RBL – see limits below ) from Pension benefits – Income Streams, these retirees prefer a self funded retirement instead of relying on government old age pension for support. Further, due to their high assets in and outside of Super are anyway not eligible for Government age old pension.

Trustees may pay a member...

The trustees may pay a cash benefit to a member when to the 'conditions of release' are triggered and are as follows:

• retirement;
• death;
• permanent incapacity;
• severe financial hardship (require approval from the fund's trustee)*;
• member attaining age of 65 and has not worked on part time basis in the previous financial year (less than 240 hours in the financial year);
• compassionate grounds;**
• temporary incapacity; or
• permanent departure from Australia where member has made written request to the trustee on or before 30 June 1998;
• permanent departure from Australia by a temporary resident;
• small superannuation balances of $200 or less; and
• any other conditions approved by APRA.

It should be remembered the trust deed must allow for the benefit to be paid in the circumstances listed above.

When you retire at your retirement age, your super fund can pay you the whole amount as a lump sum.