The more efficient and speedy deployment of member funds has been described as a cash boost for retirees. (Source: Getty)
Australia’s growing cohort of retirees can now access a cash “boost” to the balance of their superannuation. When making the all important switch from the accumulation phase towards retirement or the pension phase, members with one of the biggest funds will now enjoy an instant payout of funds.
From this week, those with eligible Hostplus accounts will be able to get an instant cash top-up when leaving the accumulation phase of superannuation to enter retirement. It comes after the fund upgraded its internal systems to create a more efficient process for members to take advantage of the rules.
“Hostplus has carefully assessed the introduction of this feature … to ensure our systems and processes can deliver bonus payments equitably and in the best interests of all members,” the super fund told Yahoo Finance.
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Then amount of the bonus is calculated based on a member’s individual account balance and investment allocation over the 12 months prior to transfer. It comes from the portion of the investment returns set aside to pay for future capital gains tax when the fund’s investment assets are sold.
Someone with an account balance of $500,000 at the time could receive an instant bonus of $7,800, while someone with a million dollars will get a $15,600 ‘retirement bonus’ upon making the switch.
“The Retirement Bonus provides eligible members with a valuable boost to their retirement savings at a key transition point, helping them make the most of their super as they move into the pension phase,” Hostplus CEO David Elia said this week.
“We believe offering a bonus payment is a fairer way to allocate tax reserves that will no longer be required as members enter the tax-free pension phase.
“We are delighted to be able to offer this feature to our members.”
Hostplus CEO David Elia said the Retirement Bonus would support members at a pivotal stage in their life. (Source: Hostplus)
Previously, the savings were distributed through the Fund’s regular tax processes and reflected in the calculation of unit prices, a Hostplus spokesperson told Yahoo Finance.
The fund is one of the biggest superannuation providers in the country, with nearly two million members.
With the number of retirees set to double, jumping to about 2.8 million people in the next decade, superannuation funds are bracing for the so-called “silver tsunami” and competing for better outcomes for their members.
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“With the maturity of the superannuation system and the increasing role superannuation now plays in the makeup of Australians’ retirement incomes, improving retirement outcomes for members is a key focus,” a spokesperson said.
Moving from accumulation to pension might sound like a niche technicality, but it has big implications for how the money in the account is taxed.
When a person hits 65, they are free to access their superannuation account, even if they are still working.
But if their account is still listed as being in the accumulation phase, the earnings on the fund are taxed at 15 per cent. This applies to investment earnings including interest, dividends, and capital gains within the fund.
The change from Hostplus comes after new data from the Super Members Council (SMC) found there are roughly 700,000 Australians over the age of 65 who aren’t working full-time that still have an accumulation account, meaning many of the were likely missing out on tax savings.
Misha Schubert, SMC’s CEO, believes laws should be updated to make this account transition automatic when people hit 65.
“We need to make the shift into retirement so much simpler, easier and more intuitive for everyday Australians,” she said.
“This challenge is now incredibly urgent as almost three million Australians start to race towards retirement in coming years.
“Moving to a system of simpler, smarter pathways into retirement would mean every Australian could retire with confidence, knowing they’re not missing out on money to pay the bills and enjoy life to the fullest.”
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