A common question we get asked by SMSF clients, nearing or in retirement, is whether it’s possible to commence a SMSF pension from their Stockspot SMSF account.
The answer is yes, it’s absolutely possible and we have many clients who’ve already taken this step. As an SMSF trustee and/or member, there are however several crucial aspects you must address before initiating an SMSF pension.
Switching from accumulation phase to pension phase in your Stockspot SMSF account
If you have a Stockspot SMSF account and you’re nearing retirement, or gearing up to start a transition to retirement (TTR) strategy, you will have already positioned your SMSF strategy for either income or capital growth. You may now be wondering, how do I manage a switch to pension income with Stockspot?
Your Stockspot diversified ETF portfolio was designed to help you accumulate and grow your wealth in the lead up to retirement. The same principle applies to the retirement phase of your investment journey. Stockspot are here to ensure you can access the money you need to fund your retirement lifestyle all while continuing to grow and protect your wealth, throughout your retirement years. We do this by using our trusted, low cost, diversified index investment approach.
Stockspot SMSF clients can easily start drawing an account based pension from their SMSF account when reaching retirement (or another condition of release).
Before you start thinking about taking money out of your superannuation, there are some very important things you need to do first.
Notifying the SMSF trustee/s and meeting a condition of release
Taking money out of super must be carefully considered, with there being many rules and conditions to meet before you are eligible to access your superannuation.
In order to start accessing your superannuation, you must satisfy what is known as a condition of release.
The most common conditions of release are:
- reaching preservation age
- permanently retiring after reaching preservation age
- turning 65 years old
- reaching preservation age and commencing a transition to retirement income stream
- permanent incapacity
Assuming you meet a condition of release, you must notify in writing the trustee/s of your SMSF (which is often yourself and another family member such as your wife or partner) that you have met a condition of release and that you intend to commence a SMSF pension.
If you engage an SMSF administrator, accountant or financial adviser to help with the administration of your SMSF, they should help manage all of this for you. Aim to loop in your administrator as early as possible so all of the administration and paperwork can be put in place ahead of time, and meet your desired timing for retirement.
As an SMSF trustee, it’s your responsibility to ensure your SMSF trust deed has a provision within the deed to pay out an account-based SMSF pension, your administrator should help with this. Most modern deeds will have this provision included, however If your trust deed is old then you may need to have it revised and updated.
What happens when you move from accumulation phase to pension phase
Generally speaking, when you roll all (or some) of your super balance to pension phase, your superannuation balance moves from the concessionally taxed superannuation environment (accumulation phase) to the tax free environment (pension phase), with 0% tax on earnings and pension drawdowns.
If you have other member/s in your SMSF (which is very common), they may be retiring at the same time as you and also intending to start a pension. If other members are continuing to work and contribute to their super balance however, their portion of the SMSF capital will continue to stay in accumulation phase. In the latter example, generally speaking, it would mean one member is moving their member balance to start a pension and therefore moves their balance to a tax free environment, while the other member balance remains in the accumulation phase and continues to see concessional contributions and earnings taxed at concessional rates.
Unless you are doing the administration yourself, your SMSF administrator/accountant or adviser will help manage this for you. Your advisor should assist in ensuring everything is segregated and accounted for correctly and all squared off with the ATO.
This can be a lot to manage as an SMSF trustee and this is why it’s common to outsource all of this to an SMSF admin professional. Failure to meet any of the reporting obligations, tax lodgements etc. can mean your fund becomes non-complying with the ATO, or you could face other issues like hefty tax penalties.
Common roles and responsibilities for SMSF stakeholders
As an SMSF trustee it’s helpful to understand your roles and responsibilities when moving to pension phase, along with other key stakeholders you may engage, such as Stockspot and your SMSF administrator.
The common roles and responsibilities are outlined below:
| Stakeholder | Role & responsibilities |
| SMSF Member Moving to pension phase | – Meeting a condition of release – Notifying the SMSF trustee/s of your intention to commence a pension and that you have met a condition of release |
| SMSF Trustee/s | – Requesting and reviewing the member’s written intention to start a pension and ensuring they have met a condition of release – Ensuring the SMSF trust deed allows for account based pensions – Reviewing death benefit nominations for the member – Reviewing the SMSF investment strategy which may need adjusting ahead of pension phase – Segregation or un-segregation of assets – Understanding the mechanics of the pension (amount, frequency, meeting minimum drawdown requirements) and making arrangements to facilitate – Reporting to ATO, potential tax lodgements – Ongoing review of the above |
| SMSF Administrator/accountant or adviser | – (If engaged) manage all of the above for your SMSF for a fee. Fees may vary depending on the complexity of your SMSF and level of service required |
| Stockspot, Investment Manager/Adviser | – Ongoing management of your SMSF investment portfolio – Assisting with pension drawdowns (via Stockspot dashboard) – Access to investment advisers for advice/assistance with managing pension drawdowns, ongoing portfolio management – Tax reporting each financial year for SMSF trustee/administrator – Cash and investment transaction reports available anytime via investment dashboard – Administrator/adviser access to Stockspot dashboard |
How to manage pension payments from your Stockspot SMSF account
Once you have confirmation that your super balance is in pension phase, you can start drawing down your desired pension income from your Stockspot SMSF account.
Simply lodge a withdrawal request inside your Stockspot dashboard in the ‘Transfer Money > Withdraw’ section, for your desired amount.
You have flexibility to decide on the amount and frequency of your withdrawals, to align with your cost of living needs and ensure you meet your minimum drawdown eg. 5% p.a. of your account balance (between ages 65-74).
Some clients choose to make a one-off annual withdrawal, whereas others prefer to take money out more frequently, such as quarterly in line with income distributions coming in or withdrawals monthly.
If you choose to take money more frequently from your SMSF account, you don’t need to worry about transaction fees or brokerage, as we don’t charge our clients any transaction costs. Your administrator may however charge you more for the additional administration required, on more frequent withdrawals. It is good to check with your administrator any costs you need to consider, before deciding on the frequency of receiving your pension income.
Your administrator will also keep track of all of your withdrawals and manage the reporting, administration and report back to the ATO.
Stockspot will continue with the ongoing investment management of your SMSF portfolio, in line with your chosen investment strategy, taking care of it all for you.
If you are nearing retirement and have questions about moving to pension phase and how it all works, we’re here to help.
