What are the requirements for lifetime income stream products?

The product to qualify as a lifetime income stream must satisfy the following requirements:

• the product must be payable for the lifetime of the investor (and any reversionary beneficiary) (unlike an allocated pension)
• there are capital access restrictions and nil capital access once the life expectancy period has been exhausted (unlike an allocated pension)
• if the investor dies within the first half of their life expectancy period then 100% of the initial investment can be repaid (unlike allocated pensions – if death occurs then the account balance is paid out)
• there must be at least one pension payment per year (like allocated pensions)
• the capital value of the income stream and the payments from the income stream cannot be used as a security for a borrowing (like allocated pensions)
• the income stream is only transferrable to another person on death (like allocated pensions)
• the income stream can be reversionary (like allocated pensions)
• the income steam can only be reversionary to a SIS dependant of the investor (but not an independent adult child of the investor) (like allocated pensions)
• if there is an amount payable from the income steam on the death of the investor  -  the amount is treated as a death benefit of the investor (like allocated pensions)
• the income stream can have a multi-year deferral period before payments commence – that is the product could be purchased on 1 July 2018 but not commence payment until say 5 years later (this is unlike an allocated pensions which do not have a deferral period – though they can be paid yearly in arrears)
• until the deferral period ends, there is no obligation to make pension payments (unlike allocated pensions which cannot have a deferral period)
• the product can be purchased using preserved or restricted components (unlike an allocated pension which must be purchased with unrestricted components)
• if the product is purchased with preserved or restricted components – benefits can only be paid if and when the investor satisfies an unrestricted release condition (typically attaining age 65 or being retired for super purposes) (this has no parallel in allocated pensions)
• the earnings tax exemption will only apply to the product when the product is in retirement phase (ie the investor has satisfied an unrestricted release condition and payments has commenced)  (like allocated pensions)
• the product terms must expressly specify that the product is not intended to be an allocated pension or to satisfy the requirements of an allocated pension