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Term Allocated Pension is a ‘complying’ retirement income
stream that is payable from a superannuation fund and can
also be commenced in a self managed superannuation fund.
Term allocated pensions are referred to as ‘complying’ income
streams due to their concessional treatment for social security
purposes where they are partially exempt from the assets test.
They are also described as ‘market-linked pensions’ or ‘growth
pensions’. This is because the underlying assets can comprise
a range of different asset classes including ‘growth’ type assets
such as shares and property. Historically, complying income
streams offered by fund managers have necessarily been backed
by fixed interest style investments due to the guaranteed nature
of the retirement income.

How do term allocated pensions work?
Term allocated pensions operate similarly to a bank account,
in that the investment earnings top up the account balance,
while it is reduced by withdrawals in the form of regular pension
payments. A term allocated pension provides for pension
payments for a fixed period based on either your life expectancy
or your spouse’s (longer) life expectancy if they are a reversionary
beneficiary and is designed so that the account balance is reduced
down to nil by the end of the term. The annual pension payments
are worked out at the start of each year in accordance with a set
formula. There is an amount of flexibility in relation to the term that
you may choose for a term allocated pension. The selected term
must be between: Your life expectancy, or that of your spouse
(if they are a reversionary beneficiary and have a longer life
expectancy) at the date the pension is purchased; and your life
expectancy, or that of your spouse (if they are a reversionary
beneficiary and have a longer life expectancy) at the date the
pension is purchased, assuming you were each up to five years
younger at the date of purchase - Please call to learn more.