Drawdown reductions needed for retirees - UPDATED POLICY

I imagine the policy change on minimum drawdown rates is retrospective in nature for the 2019-20 FY. If so, then does this mean that someone who has already met or exceeded the new minimum drawdown rate (by making withdraws on a monthly or quarterly in the current FY) is not be required to make further drawdowns for the remainder of this FY?

Hi Steve, that would be my expectation, although I have not seen written confirmation.

Re point 3 in this article, "Arrange an Enduring Power of Attorney", could the following statements be clarified:
1. "It’s important to note a Power of Attorney is effective if you have mental capacity."
Is the intent here to say that an Enduring PoA can only be effectively given if the giver has mental capacity to give it?
2. "If in any event you lose mental capacity, a Power of Attorney ceases to operate".
This doesn't make sense to me. It appears to be saying that even if you have made an Enduring PoA when you had the mental capacity to do so, that just bcos the giver subsequently loses mental capacity, the previously effective Enduring PoA ceases to operate. I thought the intent of an Enduring PoA was that it continued to be valid, and that the Attorney could continue to act on behalf of rhe giver, even if the giver subsequently lost mental capacity.

Would appreciate clarification on these points.

Hi Geoff, A power of attorney is only valid if the member has mental capacity. It becomes invalid if a member loses mental capacity.

An Enduring Power of Attorney will continue to be valid after a person loses mental capacity which is why it is important to have an EPOA in place when you are an SMSF trustee.

The intent is to demonstrated EPOA’s are more effective and therefore people should consider them and put them in place now while they can.

Thanks Olivia.
I misinterpreted what was said in point 3 - I had initially thought it was all about EPoA, even when it only said "power of attorney", but now realise it was contrasting EPoA against "standard" PoA.

A power of attorney is only valid if the member has mental capacity. It becomes invalid if a member loses mental capacity.
An Enduring Power of Attorney will continue to be valid after a person loses mental capacity which is why it is important to have an EPOA in place when you are an SMSF trustee.
The intent of my article is to demonstrate EPOAs are more effective and therefore people should consider them and put them in place now while they can.

I absolutely agree with Olivias article.
I am about to commute my pension and try to live off some meager savings. My Industry Super Fund pension now has a balance that is well below what it started with on 1st July 2019. If I withdraw the mandated 4% in June (and assuming that my super balance has yet to fall further) I will be going backwards quickly and will have a lower capital base from which to recover (although I am sceptical re it ever recovering to the previous levels in my lifetime).
I wrote a letter re minimum pension withdrawals to my local MP a few months ago. Andrew took my concerns to the Treasurer and the responses I received were quite flippant.
The Governments response to the impact of Covid-19 is admirable, but consideration has been given to everyone, except self funded retirees.
Another reason for a universal pension.

I was thinking that people who have been capped at $1.6m would have normally been thought to have had sufficiently strong earnings capacity to be able to live comfortably in retirement.
Now that interest rates are virtually zero , a conservative investor earning say 3% pa is generating $48k pa, not great but OK.
For people with far less in savings , the income shortfall becomes even more stressful.
If more risk driven, the earnings may have been higher but current and prospective losses may well result in their portfolio value falling 30% in value or even more .
We know that the market will eventually rebound but as the pensioner ages and has to draw down increasing percentages , their ability to rebuild their portfolio could well become impossible.
Olivia Long has written eloquently on the issue .
One key fear for the the old and frail is to have sufficient funds available to pay their way into Aged Care, so they scrimp on power and starve themselves rather than sell their accumulated assets.
The $1.6m cap was introduced to constrain contributions but not paper gains above this level.
Do the rules allow top-up contributions to be made to offset large unanticipated capital losses?
Rather than temporary government relief ,could consideration be made to provide a material one-off contribution for people over pension age.
The current annual limit and work test would not meet this need. What I was thinking was an ability to sell the home and downsize ie and using the lump sum difference as a “lumpy reverse mortgage “.
Anyway, just a thought bubble.

"Do the rules allow top-up contributions to be made to offset large unanticipated capital losses?"

Once someone has transferred $1.6 million to pension, even if it then falls 50%, they cannot top it up. Agree, it does not seem fair if that's caused by market falls. Here's from the ATP website.

When the amount in your retirement phase account grows over time (through investment earnings) to more than $1.6 million, you won’t exceed your cap. If the amount in your retirement phase account goes down over time, you can’t 'top it up' if you have already used all of your cap space.

Thanks Graham.
I thought that would be the answer.
I suspect the longer term policy challenges to be posed by this recession are going to be monumental.
Incrementalism/steady as she goes is not going to cut it.
I also suspect we are all going to pay a cost ,be it taxes or loss of earnings or jobs/wages - a massive effort in raising national productivity and de-cluttering rules and regulations should be a key part of the response. Jack

Perhaps it is also time to increase the $1.6m cap as this has been in place for a number of years now? In practice that limit has been effectively reduced by inflation.

I agree with the thrust of this article. I cannot, however, see why it continues to be good policy to have any fixed percentage of compulsory withdrawal since the 1.6 million dollar limit for tax free earnings in super was introduced. Super funds with balances of more than the 1.6 million pay tax on additional earnings anyway. Why compel superannuants with less than this figure to draw down on the very capital which saves the public purse from paying them a pension?

Absolutely agree with the article. Essential this is implemented ASAP. Have sent Email to our Fed Member who has responded positively. Suggest everyone do the same.
Ron Gordon has an excellent point. We should all lobby for that change. Treasury seems to have a fear of funds being retained in super at life's end. Forcing elderly folk to take large sums of money out of a protected environment at their most vulnerable time is incomprehensible.