Superannuation – and your SMSF – is your nestegg for retirement. When you are nearing retirement and looking to reap the rewards of your hard-earned savings it’s your super that you’ll call upon to fund your lifestyle.
But to do this, your super has to do two things:
- Your capital needs to GROW (your advisor will call this your accumulation phase)
- Your capital needs to pay you an INCOME eventually (s/he’ll call this drawdown or retirement phase)
In this article we’ll look at what to do when you’re thinking about point B, and looking to get regular payouts from your SMSF – whether you’re supplementing paid employment or you’re looking to retire completely (you lucky thing!).
Bear in mind that there are eligibility requirements to consider before starting a pension, such as your age and work status.
Eligibility requirements are usually called ‘Conditions of Release’.
Paperwork and timing
If you’ve had your SMSF for a while, you’ll know that these things aren’t light on the admin. If you’re #busy and risk-savvy, you might have been using an SMSF Specialist to help you with this; if you’re clever and confident with hours to burn, you might have been doing it yourself.
Either way, starting a pension from your SMSF is no exception – there is a lot of procedure to make sure you’re aware of!
This is because the tax consequences of paying an income are highly concessional and who will receive the pension also matters. Generally, pensions – and the assets supporting them – are largely tax free. The timing of the commencement of the pension therefore becomes critical.
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