Commencement of a Pension

The Draft Ruling took a hardline view as to when a pension commenced as a result of a member request.  Essentially, the Draft Ruling provided that a pension could not commence before the date of the member request for the pension.  

The final Ruling continues this hardline view.  Consequently, for a pension to commence as a result of a member request, on say, 1 July 2014, the request must be made on or before 1 July 2014.  In short, pensions cannot be retrospectively commenced.

A member could make a request dated, say 15 May 2014, for a pension to commence from the following 1 July.  The first pension payment could be made on 1 July 2014 or at any time on or before 30 June 2015.  The final Ruling distinguishes between a retrospective commencement of a pension (not permitted) and a pension being paid in arrears (which is permitted).

SMSF advisers may have to meet with their clients in May or June in order to have a pension request signed and dated by the client for a pension to commence from the following 1 July.  The actual dollar value of the pension can be determined subsequently once the previous year’s accounts have been approved and audited.  Until the actual dollar value is determined, the minimum (and maximum, if applicable) pension limits can be determined on a best guess basis.