Why a Pension ??

Most people wonder .... why do I need a pension?

Pensions are about savings -- well, actually, living off your savings. If you draw retirement income as a pension from your own superannuation fund, you can:

• continue to control the way in which your superannuation investments are managed, and

• enjoy some tax advantages in doing so.

Remember that the investment earnings on your superannuation benefits are generally taxable at 15%. This will apply until you start drawing your benefits as a superannuation pension.

When you start to receive a superannuation pension, the following things happen:

• The investment earnings needed to support your pension are exempt from 15% tax. This applies equally to capital gains on assets in the superannuation funds that you realise during payment of the pension, even on assets that were bought well before your pension started.

• The quid-pro-quo for this, however, is that the pension payments (less a proportion to reflect the pension provided form your own contributions, which have already been taxed) will be taxable in your hands as personal income. However you may be eligible to offset this tax with a 15% rebate, so that in the end the tax position on your pension may be quite attractive.

OK - so the real advantage in receiving your superannuation benefits as a pension lies in the flexibility with regards to your investment strategy and to your tax position. How do I go about starting a pension?