Superannuation change to protect nest eggs by waiving minimum withdrawal rules

THE government has temporarily changed the rules for some pension accounts to protect from having to withdraw their nest egg capital.

THE federal government has made a temporary ruling on some pension accounts that will protect retirees' capital from being diluted in a depressed market.

The government is suspending the minimum drawdown requirement for account-based pensions for the second half of 2008-09.

"This will occur through a 50 per cent reduction in the minimum payment amount for 2008-09,'' Superannuation Minister Senator Nick Sherry said in a statement.

Presently, it is a requirement that minimum payments be made from a superannuation account-based pension at least annually.

The rule is designed so that retirees draw down on their superannuation capital during their retirement.

The new measure responds to concerns that meeting the minimum drawdown amount in 2008-09 will mean having to sell investments assets and realise losses in a depressed market.

The temporary relief also addresses the concern that the minimum drawdown requirement was set based on asset values as at July 1, 2008, when equity values were higher.

"The government recognises that the significant downturn in global financial markets has had a negative effect on retirees' superannuation capital in account-based pensions,'' Treasurer Wayne Swan said in the joint statement.

The government would continue to closely monitor market conditions and examine options for a longer-term solution to following the Henry review into taxation.