Minimum percentage factors for account based pensions are unrealistic

Account based pension statutory percentages are too high in these economic times where deposit interest rates offered by financial institutions are hovering at all-time lows.  When in pension mode, the drawdown amount, based on age and statutory percentages, can cause excessive erosion of fund balances that are made up of cash, term deposits and fixed interest investments. Minimum percentage factors for account based pensions are unrealistic

As Australians are living longer, self-funded retirees need their money to last.  In order to maintain complying pension status, superannuants aged between 75 to 79 years are required to drawdown 6% of their account balance, those between 80 to 84 years of age 7%, those between 85 to 89 years 9%, those over 90 years of age 11%, and those lucky enough to live longer than 95 years of age, 14%.

“At these stages of life, elderly Australians have typically moved their investment portfolio towards more conservative, less risky investments — that is, cash, term deposits and fixed interest.  Applying the current legislated drawdown rates has resulted in the rapid erosion of their nest egg,” says Moti Kshirsagar, CEO of Taxpayers Australia Ltd.

These eroding drawdown rates may require many elderly Australians to resort to relying on the Government age pension as they live beyond their 80s and into their 90s.

The Reserve Bank has today left the official interest rate at 2%, with the outlook for interest rates to remain at record lows for the foreseeable future.

“During the Global Financial Crisis, from 2008 to 2011, the government reduced the pension drawdown percentage to half the current day amounts,” Kshirsagar says. “In these times, a similar approach would be prudent.”


Note to editor: If you’d like more information about this topic or to schedule an interview with Taxpayers Australia’s CEO, Moti Kshirsagar, please call Roseann Tanner on (03) 8851 4504 or email

Taxpayers Australia is a not-for-profit organisation committed to a fairer and more transparent taxation system for every Australian taxpayer. Its aim is to provide taxation practitioners, superannuation professionals, small businesses and individuals with up-to-date, informative and above all understandable information about taxation – to ensure that every Australian pays the right amount of tax and not a cent more.

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