Section 7 – TIC Pensions
 

 Pension Options

TIC Pensions offers the following pension options to enable your retirement planning to effectively benefit from the tax and social security advantages available through your superannuation savings:

• Transition to Retirement Pension; and
• Account-Based Pension.

The type of pension you need will depend on your personal circumstances. As pensions are complex and give rise to different taxation and social security implications depending on your personal situation, we recommend that you obtain professional financial advice from a licensed financial adviser.

A TIC Pension may be a tax effective way of maintaining income in your retirement. Lump sum and individual pension payments to members aged under 60 will have a tax free and a taxable component. Tax offsets may also apply.

Pension payments to people aged 60 and over are generally tax free (a more detailed summary of relevant taxation rules is set out on Tax on Pensions in Section 8).

Transition to Retirement Pension

Once you have reached your preservation age (refer to table overleaf), a Transition to Retirement Pension allows you to access your superannuation as an income stream while you are still working. The Transition to Retirement Pension has similar features to an Account-Based Pension but with some restrictions on when you can access your benefits as a lump sum.

KEY FEATURES

• Minimum contribution $20,000 (NB. you cannot make additional contributions to your pension account after the pension commences),
• No tax payable on pension payments or lump sum withdrawals if you are aged 60 and over,
• Tax free investment earnings,
• A pension that is payable to you while you are still working to supplement additional income,
• Flexible payments, subject to aged based minimum and a maximum of 10% of total account value,
• Tax concessions on the after tax (i.e. non-concessional) contributions contained within the Pension account,
• A 15% rebate on any taxable portion of the income stream,
• Lump Sum withdrawals permitted on retirement and to give effect to payment splits under Family Law,
• Permitted to roll pension back into your superannuation account at any time,
• Continue making superannuation contributions to your superannuation account while receiving a pension,
• Wide investment choice, and
• Minimum and maximum annual payment applies.

Account-Based Pension

The Account-Based Pension is a low-cost plan that provides retired persons or those aged over 65, with a tax-effective regular income in retirement. You can start your Account-Based Pension with money you have in the TIC Plan or benefits rolled over from your other superannuation accounts. If you wish to rollover from different sources these must be consolidated into a single superannuation account before your pension commences.

KEY FEATURES

• Minimum contribution $20,000 (NB. you cannot make additional contributions to your pension account after the pension commences),
• No tax payable on pension payments or lump sum withdrawals if you are aged 60 and over,
• Tax free investment earnings,
• Flexible payments, subject to aged based minimum but no maximum payments,
• Wide investment choice,
• Fully commutable, and
• Minimum annual payment applies.

You can choose and vary the amount of income you receive each year (subject to Government prescribed limits). You can also make lump sum withdrawals if you need additional funds at any time.

 Eligibility to Start a Pension

You can start a pension with TIC Pensions by either rolling over your account balance from TIC Employer Sponsored or Personal Super or from another complying superannuation fund.

Generally, your ability to start a pension will depend on the classification of your superannuation benefits and whether you have met a condition of release for these benefits. Your superannuation may consist of one or more of these components, although the larger part of most people’s superannuation benefits is preserved.

You have met a Condition of Release for starting a pension when you:

• reach age 65; or
• reach age 60 and leave your employer; or
• reach preservation age and retire permanently from the workforce; or
• become permanently incapacitated (defined on page 27); or
• reach your preservation age (refer to table above) and use your funds to start a Transition to Retirement Pension.

Pension Payments

You can choose your regular retirement income to be paid from your pension monthly, quarterly or annually, to your bank, building society or credit union account. Your pension payment will be credited to your account on the 1st of each month (or the next business day).

You must receive at least one pension payment each financial year. If you commence a pension before 1 June the pension payment will be a proportion of the required minimum payment for that year. However, if you commence your pension on or after 1 June, no payment is required until the next financial year.

The Trustee reserves the right to delay or suspend pension payments, including where unit pricing information is unavailable or unreliable, the payment involves an illiquid investment option or it would not be in the best interests of other members of the TIC Plan.

Transition to Retirement Pension

You can choose your regular pension payment within the prescribed limits set by the Government.

The minimum annual pension payment is a percentage of your account balance determined according to your age as at July 1 in each year (or at the commencement date of the pension in the first year). The table below sets out the percentage factor to calculate the minimum amount payable each year. For example, if you are aged under 65 the minimum amount payable each year is 4%.

Transition to Retirement Pensions are subject to a minimum annual payment (depending on your age) AND no more than 10% of your account balance at commencement or at the beginning of each subsequent financial year.

Account-Based Pension

You can choose the amount of your regular payments (subject to Government prescribed limits), and you can vary the amount and frequency of these payments at any time to suit your needs. You can also draw lump sum payments as your circumstances require.

The minimum annual pension payment that you must take each year is a percentage of your account balance determined according to your age which is calculated on commencement and as at 1 July in each year. No maximum payment applies.

The table below sets out the applicable percentage factor to calculate the minimum amount payable each year for both Transition to Retirement and Account-Based Pensions. The Government introduced a 50% reduction to the minimum draw-down applicable to account-based pensions in 2009. This has been extended for the 2010/11 financial year and is also shown in the table below.

Pension Term for Transition to Retirement and Account-Based Pensions

Your pension payments will continue until the money in your account is exhausted. Depending upon the size of the amounts that you withdraw from your superannuation account from year to year, you should be aware that your pension may not provide a pension for the rest of your life.

How long the money lasts will depend on factors including the amount you initially invest, the amount of pension payments and any lump sums you withdraw, and investment performance (investment income and growth which may be positive or negative) of the investment options you select and fees and costs.

Starting a Pension

You can start your pension by transferring your benefits from TIC Employer Sponsored Super or TIC Personal Super and with a rollover from one or more other superannuation funds, and/or from an Employer Termination Payment from your employer.

From 1 July 2007, Employer Termination Payments can only be paid into a superannuation fund in limited circumstances, that is, they relate to entitlements on termination of employment specified in existing employment contracts as at 9 May 2006 and the payments are made into superannuation prior to 1 July 2012.

Note: There are other amounts that may be paid into a superannuation fund for the purpose of commencing a pension such as certain disablement amounts on settlement of a disability claim (outside of superannuation), proceeds from the sale of a small business, and superannuation sourced from a foreign superannuation fund. Special rules apply to these amounts. If you are going to receive any of these amounts or are considering payment of them into superannuation, we recommend you obtain professional advice.

The minimum amount we require to start any type of pension is $20,000. Once your pension account has been established, you cannot add further money to it. If you have other accumulated superannuation savings with which to start an income stream, you will need to commence a separate pension. You can have more than one pension in TIC Pensions.

To commence a pension complete the Pension Member Application Form at the end of this PDS. To make your investment to start your pension you can:

• request the transfer of your benefits from your superannuation account in the TIC Plan and/or other benefits you may hold in other superannuation funds using the Transfer Request Authority Form included with the Application Forms; and/or
• send a final superannuation contribution with your application (if you are still eligible to contribute to a superannuation fund and meet a Condition of Release) by cheque payable to ‘TIC Retirement Plan [Applicant Name]’.

To transfer superannuation benefits from more than one superannuation fund, you must complete a separate Transfer Request Authority Form for each fund. You can photocopy the form, or obtain additional forms from our website or by calling our Client Service Line (details on the inside front cover).

You can nominate the amount, frequency and commencement date of your pension payments in the ‘Pension Payment Details’ section of your application. To nominate your bank, building society or credit union account to receive your pension payments, complete the ‘Payment Details’ section of your application.

Pension Investment Strategy

As different people have different investment needs, and as your investment needs may change during your lifetime, TIC Pensions offers a range of investment options to suit different investment objectives.

For information about each of the investment options refer to Section 4. You can select the investment option/s you wish to invest in by completing the ‘Pension Investment Details’ section of your application.

If you have multiple TIC Plan accounts - for instance, an employer sponsored superannuation account and a pension account - you can choose different investment options for each account.

If you do not advise the Trustee which investment option you would like to select, your pension account(s) will be invested in the TIC Balanced Fund investment option.

Changing Your Investment Strategy

You can change your investment strategy at any time by switching your existing investment between investment options.

We will process any switching requests received at the Administrator’s office by 3.00pm (VIC local time) on any business day that day, using unit prices for that day. If we receive your request after 3.00pm (VIC local time) on any business day, we will process it using unit prices for the next business day.

The Trustee may charge a fee for investment switches (see Section 2 for details on the ‘Investment Switching Fee’). In addition, you may incur transaction costs via the unit price buy/sell spreads in the investment options you switch to and from (see the information in the investment option profiles in Section 4).

The Trustee may also automatically switch your investment option/s when ‘rebalancing’ your investments (see ‘Automatic Rebalancing’ in Section 4).

The Trustee reserves the right to delay or suspend the implementation of investment switches, including where unit pricing information is unavailable or unreliable, the switch involves an illiquid investment option or processing the switch would not be in the best interests of other members of the TIC Plan.

To change your investment strategy complete and forward a Switching Form to us. You can obtain a form from our website or by calling our Client Service Line (details on the inside front cover).

Nominating a Reversionary Pension Beneficiary

You can nominate your spouse as a reversionary pensioner. This means that he or she will continue to receive a tax-effective income stream (called a Reversionary Pension) upon your death. You can also nominate your child as your reversionary pensioner if your child is:

• under age 18; or
• over age 18 but under age 25 and financially dependent on you; or
• permanently disabled.

Pension payments to your child will be required to be paid as a lump sum by the time the child reaches age 25 unless the child is permanently disabled. The laws are complex and you should seek appropriate advice before nominating your child as a reversionary pensioner.

Once you have started an Account-Based Pension or Transition to Retirement Pension, you cannot add a reversionary beneficiary or change your nomination, other than by withdrawing your current pension and starting a new one.

If your reversionary beneficiary does not survive you, your remaining account balance will generally be paid to your estate as a lump sum on your death. How it is paid is at the discretion of the Trustee, taking into account any nomination of beneficiary/ies you made prior to your death.

If you wish to nominate a reversionary beneficiary, you must do so at the time of your application by completing the ‘Reversionary Pension and Beneficiary Details’ section of your application.

As there are different tax and social security consequences depending on who receives your pension after your death, we recommend that you seek qualified tax and financial advice when making any nomination of beneficiary.

If you do not wish to nominate a reversionary beneficiary, you can still nominate one or more of your dependants and/or your legal personal representative to receive the balance of your account on your death.

Please refer to the information on nominating a beneficiary in Section 9.

Changing Pension Payments

You can request a change to your pension payment frequency and/or amount (subject to the Government’s prescribed limits) and also change your nominated account to receive your pension payments at any time.

You need to make your request to us in writing for any change to your pension payments setting out the change you are requesting, including full details of any new bank, building society or credit union account.

If you contact us at least five business days before the due pension payment date, we can make the change for the next payment; otherwise the change requested may be effective from the following payment date.

Variations in regular pension payments will be treated as an irregular pension payment (rather than a commutation or lump sum withdrawal) unless you specify otherwise.

Lump Sum Withdrawals
 

Transition to Retirement Pension

Transition to Retirement Pensions are non-commutable except in limited circumstances. If you are in receipt of a Transition to Retirement Pension, you may only commute your pension at age 65, on earlier retirement, or if you satisfy another relevant Condition of Release (see page 16). However, there are other circumstances in which a Transition to Retirement pension may be commuted as follows:

• in order to transfer back from TIC Pensions to TIC Personal Super (where your benefits will continue to be preserved until you satisfy a Condition of Release);
• to roll over your benefit into the accumulation section of another complying superannuation fund or retirement savings account;
• to roll over to another Transition to Retirement Pension;
• other circumstances permitted by law (e.g. Family Law splits); and
• on death.

In addition, any unrestricted nonpreserved component of a Transition to Retirement Pension can be taken as a lump sum at any time (i.e. as a partial commutation).

Account-Based Pension

You can withdraw all or part of your account balance at any time from your Account-Based Pension. However, before an Account-Based Pension can be commuted, a minimum pro-rata payment must be made prior to commutation except where commutation arises due to the death of the recipient or in other limited circumstances prescribed by superannuation legislation.

Making a Withdrawal

You can obtain the current withdrawal value of your account by calling our Client Service Line (details on the inside front cover).

To make a withdrawal from your pension, complete a Withdrawal Form, available by calling our Client Service Line and mail or fax the form to us (details on the inside front cover).

You will generally receive your withdrawal proceeds no later than 30 days after we have accepted your withdrawal request. Withdrawal payments can be made by transfer to your bank, building society or credit union account, or by cheque. Payments cannot be made in cash.

As Trustee, we may suspend or delay the processing of a withdrawal. This may occur in the case of a large withdrawal, or in certain other situations. Because of the illiquid nature of some underlying investments, the fund managers may delay payment of a withdrawal request, where it is in the best interest of all members. Refer to ‘Illiquid investment option’ in Section 3.

We will send a Withdrawal Confirmation to you.

Generally, if you are under age 60 and make a partial withdrawal from your pension account, the amount payable must comprise amounts withdrawn proportionately from both the taxable and tax-free components of your pension account. You cannot nominate the amount you will draw down from these components.