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My wife and I have a SMSF and are fully retired. We have sufficient savings that we haven’t had to draw at all from the SMSF. I turn 65 next year and my wife will be 65 in 2016.
We are the only members of our SMSF. Over the next two or three years I expect to access 25% of our SMSF for a house change.
Even though we will be 65, can we retain our SMSF over the next few years without converting it to pension phase?
I realise the tax benefit in changing to pension phase, but prefer to sacrifice this benefit in order to retain lump sum access. From reading the Switzer report, I understand there is a 10% withdrawal limit if in pension phase and this would be too restrictive for us.
I am aware of the annual minimum % withdrawal that must be made after age 65.
A: Thanks for the question.
Firstly, yes you can keep the fund in ‘accumulation mode’ once you turn 65 – you don’t have to take a pension.
However, I would still recommend going into pension phase at age 65 because taking a pension doesn’t restrict your ability to withdraw a lump sum. Assuming your trust deed allows it, most account based pensions can be commuted at any time – that is turned back into a ‘lump sum’ and withdrawn. You can do full commutations, or partial commutations.
Finally, the 10% maximum withdrawal limit only applies to a ‘transition to retirement’ pension. A transition to retirement pension is an example of an account based pension that cannot be commuted – until you meet another condition of release, such as turning 65.
