As you may know, in December last year, the Australian Government introduced significant changes to legacy pensions, allowing retirees to exit outdated pension structures and transition to more flexible retirement income options.
These reforms impact market-linked, lifetime, and life expectancy pensions, providing retirees with greater control over their retirement savings —but also raise key financial considerations.
What are the key changes?
Five-Year Window to Commute Eligible Legacy Pensions:
There is now a five-year period for pensioners to commute (convert) eligible legacy pensions into an account-based pension or other income stream options. This change provides pensioners more flexibility in managing their retirement income strategy while ensuring compliance with new regulations.
Ability to Transition to Account-Based Pensions or Retain Funds in Accumulation Phase:
Pensioners now have the option to transition their legacy pensions to account-based pensions, which allow for more flexible and efficient management of superannuation funds. Alternatively, they can choose to retain their funds in the accumulation phase, which may be more beneficial for some members depending on their retirement goals and financial situation.
Exemptions from Contribution Caps for Amounts Moved from Pension Reserves:
The regulations introduce exemptions from contribution caps for amounts transferred from pension reserves into the accumulation phase. This provides an opportunity for SMSF trustees to move funds without triggering excess contribution tax, allowing for better long-term management of superannuation balances.
What are the implications for your clients?
These changes offer trustees and members increased control and flexibility over their superannuation and pension arrangements, along with potential tax advantages and the ability to adapt to the evolving regulatory landscape. However, careful consideration is essential to navigate the complexities.
Some key impacts include:
Tax Considerations
Exiting legacy pensions may trigger tax liabilities, making careful planning crucial to mitigate any adverse tax consequences.
Centrelink & Age Pension Impact
Some clients may lose access to favourable Centrelink treatment, which could affect their Age Pension entitlements and overall financial position.
Estate Planning
Adjustments to pension structures could influence how death benefits are distributed, requiring a review of estate plans to ensure the desired outcomes for beneficiaries.
Webinar: How to Support clients through legacy pension changes with expert strategies
Are you looking to better understand and navigate the recent changes to legacy pensions to support your clients more effectively?
Join our exclusive webinar with SMSF experts Emma Partenza and Jason Roccasalvo, where they will break down the latest legislative updates and provide practical strategies for accountants advising SMSF clients.
What You’ll Learn:
- The key legislative updates on legacy pensions and what they mean for your clients.
- The tax implications of transitioning clients out of legacy pension products.
- How to guide clients from market-linked and lifetime pensions to more flexible options.
- Practical strategies for tax-efficient pension planning under the new rules.
- And MORE.
Don’t miss this opportunity to equip yourself with the knowledge needed to confidently guide your clients.
TAG Financial Services Legacy Pension Services
With decades of experience assisting clients with legacy pensions, TAG Financial Services understands the complexities of these income streams.
Our expert actuarial and superannuation team is ready to help you navigate the new regulations, providing tailored advice on restructuring your client’s SMSF legacy pensions and distributing pension reserves to members.
For a no obligation discussion, please contact us and we can provide you with upfront quote for your SMSF client’s scenario.
Email us at super@tagfinancial.com.au or give us a call on 03 9886 0800.
Disclaimer: The information contained is general in nature. Professional advice should be sought before acting on any aspect on this page. Financial planning services provided by TAG Financial Advisors Pty Ltd (ABN 77 154 205 017 AFSL 415632), a wholly owned subsidiary of TAG Financial Services Pty Ltd (ABN 67 075 374 686). Copyright 2025. Please do not reproduce without the expressed written consent of the author.