One of the most important modifications to superannuation this year – coming changes to the age 55 preservation requirement that must be satisfied in order to gain access to super benefits – has so far attracted little attention.
This might be regarded as surprising given preservation is such a fundamental aspect of superannuation, where currently, in exchange for agreeing to lock up your super savings until you are at least 55, you get tax concessions that make super an attractive form of long-term investment.
Whether the eventual access is due to a desire for early retirement – which is before the age of 65 – or to start a pre-retirement or transition to retirement pension which this year is an entitlement that has been around for 10 years, 2015 is a watershed year as far as the topic of when you can start spending your super is concerned.
From the middle of this year, anyone born between July 1, 1960 – which currently makes them 54 – and June 30, 1961 (which makes then 53 today) will have to preserve their super and wait until they turn 56 before they can have the same superannuation access rights as someone who is already 55.
Someone born on June 30, 1960, who will be 55 on their birthday this year, can access their super immediately so long as they also retire and never intend to work again; a July 1, 1960, baby boomer must wait until they turn 56.
This is a major change given there is only a one day difference between June 30 and July 1. In fact, anyone born between July 1, 1960, and June 30, 1961, must hold their horses on super access until they are 56. The same new age condition will also apply to those wishing to start a pre-retirement or transition to retirement pension in this age group.
It’s likely to require quite a significant change in thinking, says superannuation adviser and strategist Peter Crump of ipac South Australia. Those planning for their retirement or pre-retirement will need to be aware and factor it in. Advisers must also be a lot more careful when talking about super access.
In addition, the age 55 super access age will stretch out even more over each of the next five years as the access age, also known as the superannuation preservation age, increases by a year in 12-month increments. This means that if you were born between July 1, 1961 and June 30, 1962, your access or preservation age will be 57.
For those born between July 1, 1962 and June 30, 1963, it will become 58 and where birth dates are between July 1, 1963 and June 30, 1964, it will be 59. Where a super fund member was born on or after July 1, 1964, their benefit access age is 60.
This will be the new longer-term preservation age that will replace age 55 going forward.
These changes, says Crump, are likely to see a range of preservation ages within a family where someone born in August 1958 can access their super at any time because their preservation age was 55 whereas someone born in October 1960 must wait until they are 56.
A younger member born in July 1965, who is currently 49, must however wait until they are 60.
Originally published in the Australian Financial Review.