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Convert an accumulation account to a pension account

Members turning 65, ceasing full-time work after reaching their “preservation age“, or meeting other “conditions of release” may want to transfer part or all of their superannuation accumulation account to a pension account or a transition to retirement account, in order to draw regular income to fund their retirement or top-up reduced income in semi-retirement.

Mclowd now supports converting part or all of an accumulation account to a pension or transition to retirement account.

Prerequisites and Verifying the Member Account Balance

Before effecting a conversion from Accumulation Account to a Pension or TTR Account, Trustees should verify that:

  1. The member has an active Accumulation Account with a balance greater than $0.
  2. The member meets the conditions of release (refer to Legal Considerations: Conditions of Release).
  3. Account entries for the period up to the day prior to the date the pension or TTR account is to commence have been completed. (Further entries will not be able to be posted after this process has been completed.)

Verifying the Account Balance or Generating an Interim Balance

Before establishing the new account, you need to calculate the member’s account balance. That requires correctly assessing the member’s share of income and tax up to the day prior to the day the pension is to start.

Account Conversion on 1 July

For account conversions on 1 July in a selected year, the first step is to ensure the End of Year Processing has been completed and account balances are current as at 30 June of that year.

Account Conversion on any other day of the year

To do that, you need to go to Financial Periods on the Mclowd settings menu and create a new “Interim Period”. The period will extend from 1 July in the financial year in which the pension is to commence to the day immediately prior to the day the pension is to start.

Once the Interim Period is created, Mclowd will require you to go through each of the steps you normally follow to close a financial year. You will be closing the Interim Period, and you won’t be able to enter further transactions after the end date you enter for the Interim Period, so make sure you have entered all transactions up to the date the pension is to begin.

Refer to How to Calculate an Interim Period Balance if you wish to see more information on creating an Interim Period.

How to Convert an accumulation account to a pension account

From the More menu, select Members Accounts.

You will see the Members Account Administration screen. In this example, we are going to convert Caroline Smith’s account to an Account Based Pension.

From the Action column, select the down arrow on the right – next to Select for Caroline Smith, then select Commence ABP. If you are starting a Transition to Retirement Pension, then you would select “Commence TRIS”. The screens for an Account Based Pension and a Transition to Retirement Pension are almost identical.

You will then see the Member Account screen. Complete the fields on this screen and then select RETRIEVE MEMBER BALANCE.

You will now see the Member Account screen for Caroline Smith. If the member is less than the age of 65, you will see a warning message indicating that the member is less than 65 and needs to meet a condition of release.

Complete this screen and make sure you complete the following:

  • Account description. In this example, we have named it ‘Caroline Pension’.
  • Pension Purchase Details:
    • Full if using entire balance for pension (Purchase price will be pre-filled)
    • Partial if you are only going to create a partial pension. Enter Purchase price if you select Partial pension
  • Reversionary pension details
    • If Yes – then select the Reversionary beneficiary:
      • From a listed member
      • Other – if you select ‘Other’, then you should enter Name, Date of Birth, and Gender
  • Death Benefit Pension Details – No or Yes

Once you have completed all Information, select CALCULATE PENSION MINIMUM.

You will then see the Member Account screen again, but you will now see a Pension Minimum Calculation at the bottom of this screen which will show:

  • Age of Beneficiary as at Pension Start Date
  • Minimum Percentage Factor
  • Purchase Price
  • Full Year Minimum Pension Payment
  • Full Year Maximum Pension Payment (for a Transition to Retirement Pension only)

Select SAVE DETAILS if you are happy with the results.

You will now see the Member Account Administration screen with the newly created Account Based Pension account. Please note that Mclowd shows the Minimum Percentage of 5% and the Minimum Pension of $25,000 as the beneficiary is over 65 as at early January 2021.