Allocated Pension and Transition to Retirement Allocated Pension Plan (TRAP)

 

How it all works

Allocated Pension

When you apply to join the NCSF Allocated Pension, your NCSF superannuation funds are transferred to your new Allocated Pension account. You nominate and receive regular income payments (within Government limits) and any lump sum one-off payments you may request. Investment earnings are applied to your account balance, and tax (if applicable) and the administration fee is deducted.

Transition to Retirement Allocated Pension ( TRAP)

The TRAP works the same way as the Allocated Pension except that you are able to commence the pension while you are still working and aged between 55 and 64.  However, you are unable to commute any part of the Pension to a lump sum until you retire permanently from the workforce or reach age 65.

Who can join?

Members of NCSF can apply for an Allocated Pension upon retiring from the workforce after their preservation age*, or if they become permanently disabled.


 

How much do I need to start an Allocated Pension with NCSF?

An NCSF Allocated Pension account can be started with as little as $20,000. This will come in the form of a transfer of benefits from your NCSF superannuation account.

 

How much income will I need at retirement?

Although you won’t have the work related expenses after you retire, financial advisers estimate that you may still require somewhere between 65%–70% of your pre-retirement income at retirement.
Depending on your personal circumstances, you may still have financial commitments such as a mortgage, outstanding loans (including credit cards) or unexpected expenses such as emergency medical costs.
Even though some of these expenses may be over a relatively short period of time, they may have an impact on the level of income you have available at retirement.

 

Can I use personal funds to start my Allocated Pension?

Due to the concessional tax treatment that Allocated Pensions offer, only superannuation fund monies can be used to set up an Allocated Pension. However, adding to your NCSF account via lump sum payments, regular voluntary contributions from your pay or rolling over other superannuation accounts you may have to NCSF prior to retirement, will increase the amount of regular income at retirement.

 

Can I roll-over other superannuation benefits after I start my Allocated Pension account?

Yes, however due to Government guidelines, once you have set up an Allocated Pension account, you can not add to it, so a separate account will need to be created to accommodate additional funds.

A second account can be set up provided it has at least $20,000 as an opening balance.

If your rollover contains a post 1983 untaxed component, NCSF is obliged to deduct 15% contributions tax upon transfer to the Allocated Pension.


 

How long will my Allocated Pension last?

Your Allocated Pension payments will continue to be paid until the balance of your account reaches zero or upon your death.

How long your Allocated Pension lasts will depend on the following factors:

  1. How much was initially invested in the Allocated Pension
  2. What investment strategies your money is invested in over the years and the level of performance of those investment strategies
  3. How much income you take (within minimum/maximum levels) and how much in lump sum withdrawals (also known as commutations) you make during the life of your pension.

Taking into account the above factors, there is no guarantee that an Allocated Pension will last until death.

Generally speaking, if your annual investment earnings are more than your annual pension payments, fees and commutations, your account balance should go up. However there are no guarantees of positive performance of the investment options and from time to time, investment earnings may be negative.

 

Will my age pension (or other pensions) be affected?

In some circumstances your NCSF Allocated Pension may improve your eligibility for a Government age pension. The Allocated Pension is included in the income and asset test.  Additional information may be obtained by contacting Centrelink or your financial adviser.

 

Can I close my Allocated Pension account at any time?

The Allocated Pension account can be closed at any time either by withdrawing the remainder of your account in cash or transferring your account balance to a complying superannuation fund (including another Allocated Pension). An account termination fee of $40 applies.

You may incur lump sum tax if you take your benefit in cash.

 

What happens in the event of my death?

In the event of your death, the Trustee may pay the remainder of your benefit to your dependants or your estate as a lump sum payment. In the event that you have nominated your spouse as your beneficiary, they may be offered the opportunity to become an NCSF Allocated Pension member in their own right and a new account would be set up in their name.

 

Do I need to nominate a preferred beneficiary?

In the event of the death of a member, it is important for the Trustee, (when determining who the benefit is to be payable to), to be guided by the members wishes.

Preferred Beneficiary

Upon the death of the member, the Trustee will generally pay the outstanding balance of your pension account as a lump sum to your dependants or your estate.

You may nominate a preferred beneficiary in the event of death however the Trustee has the final say as to who the benefit will go to.

The Trustee also has the discretion to pay the balance as a new Allocated Pension if the recipient is a dependant for superannuation purposes (your spouse, de facto spouse, your child or a person who is wholly or partially dependant on you at the date of death), and elects to do so. Alternatively this person may elect to take the outstanding benefit as a lump sum.

 

14-Day cooling-off period

A 14-day cooling-off period is available if you decide to invest in the NCSF Allocated Pension.

 

Financial Advice

Prior to deciding on whether to take up an Allocated Pension, we strongly suggest you seek independent financial advice to determine whether an Allocated Pension is suitable to your needs. NCSF does not have any financial advisers nor do we recommend any particular organisation to provide financial planning advice.