Super news about the super drawdown


The federal government announces a 12-month extension to the current halving of the superannuation drawdown limits. Here’s what it means for you.

Key Points


  • Retirees must drawdown a minimum amount of superannuation in the pension phase to comply with super rules
  • The drawdown rate increases with age to encourage older Australians to spend rather than save
  • The halving of drawdown rates during the COVID-19 pandemic has been extended for another 12 months until 30 June 2022

In welcome news for many retirees, the Federal Government this week announced an extension of the temporary reduction in superannuation minimum drawdown rates for a further year to 30 June 2022.

Last year, National Seniors worked with other organisations as part of the Alliance for a Fairer Retirement System to call for the temporary reduction in the superannuation minimum drawdown rate during the COVID crisis (as had been done during the GFC).

The government responded by reducing the minimum drawdown rate by 50%, which was due to end on 30 June 2021.

The government has now decided to extend the 50% reduction in the drawdown rate for the 2021-22 income year.

For someone aged less than 65 this means they will still be able draw down as little as 2% of their superannuation balance in an ABP, compared with the pre-COVID minimum of 4%.

And, someone aged 95 or more will have a minimum drawdown rate of 7%, compared with the pre-COVID 14% minimum.

An unexpected reprieve


While National Seniors supports the extension, we are mindful that it is only temporary and question why the government won’t reduce the rates permanently. After all, the Prime Minister said the reduction was to give retirees greater “flexibility” in retirement. So, why not make the extension permanent?

More than one year into adjusting to the financial impacts of COVID-19, one of the biggest issues still on the minds of Australian retirees is the health of their financial nest egg in a recovering yet still uncertain share market.

In the past week alone, as we have inched closer to the impending expected changes of 1 July 2021, we have heard from several members and supporters concerned about the drawdown rate:

“In 2020 to 2021 we are able to take 3.5% from our pension fund. This has been helpful in avoiding lost principal when the share market crashed. For preference I would prefer the minimum to stay at 3.5% because it gives us some latitude to make a choice of what we take out.”

Other retirees have raised concerns about the high drawdown rate when you get older. This is particularly concerning for those over 75. There are likely situations where older couples have all their super in one account. If one of them is much younger, higher drawdown rates on the older spouse could have negative implications for the younger spouse:

“…my concern is that my wife is over 7 years younger than me and if I live to or beyond the statistically average age for men. Then if and when I die, there will insufficient funds left in the pension for my wife, because of the increasing compulsory draw down. She does not work and is financially dependent on me, she does not have any super/ABP. Yes, she could apply for a pension, but we have always tried not to be dependent on the Gov.”

It could be that removing the age limit on super contributions or allowing couples in this situation to use the younger spouses’ age as the determining factor for the drawdown would likely have some benefit.

Many of the retirees who want to retain their savings in super due to longevity concerns will welcome the temporary change, but it’s important to remember that this setting may not be in the interests of all retirees.

Retirees with low super pension account balances may need to withdraw more than the minimum to cover their living expenses, so they should contact their superannuation fund to discuss the optimal setting.

There is no indication whether this reduction will be extended beyond 1 July 2022.

For some, that would be really super!