AMP Super Lifetime could reduce the assessable amount the federal government considers when it works out whether a retiree qualifies for a pension.
See also: How does the age pension work?
The feature doesn't affect your actual super balance, but establishes a separate balance for means testing which AMP calls a "concessional" balance.
For Centrelink purposes, this balance increases in line with deeming rates, which are usually lower than actual investment returns.
Once you retire, you can choose to move some of your super into an AMP Lifetime Pension account, which works similarly to an annuity with regular income.
When Centrelink assesses the value of this Lifetime Pension for pension eligibility, it will use the lower concessional balance rather than the actual total super balance.
Helps more qualify for aged pension
It effectively means more people will qualify for a pension, or part-pension, to supplement their retirement income alongside their super benefits.
Over time, members may then choose to draw a higher income from the rest of their super balance, which could make them ineligible for future pension payments.
Eligible AMP Super Choice members have had the feature automatically added, while eligible MySuper members can choose to add it.
AMP Director of Retirement Ben Hillier says the benefits go beyond the additional income from the pension.
"Having some form of...pension is really important to people, not necessarily because of the actual amount of money you get because it can be a fairly modest amount, but you also get the pension and concession card, which is really, really valuable," he told the Savings Tip Jar.
"[The card] gives you discounts on all sorts of things, really cheap pharmaceuticals and healthcare, discounts on your rates, public transport, all sorts of things.
"Being able to qualify....is quite valuable and a strong incentive for people."
He explained that the younger you are when you activate the Lifetime feature, the higher the potential benefits.
"It's quite common for us to see modelling on a young person...a decade or two or three even from retirement, they could easily be getting $100,000 or more in an extra age pension."
How exactly does it work?
AMP Super Lifetime works because of government concessions for "innovative retirement income streams" (IRIS).
This was introduced in 2017 as a way to make more people spend their superannuation balances.
In practical terms, instead of drawing down income from your own account, you get a guaranteed "income for life" from the fund.
Mr Hillier said the government introduced concessions to encourage the take up of this new form of super income.
"Basically the assets, the amount of money you use to buy one of these lifetime income streams, it gets discounted," he explained.
"What we've done at AMP is taken the benefits the government has provided and expanded it even further because the government's allowed for you to purchase these solutions before retirement."
When you activate Super Lifetime, you're effectively buying into an IRIS, which is why the concessional balance treatment as outlined here is permitted.
New super tax "breaks longstanding principles"
Another big change coming to Australian super is the proposed higher tax rates on larger balances.
For the 25/26 financial year, the tax rate on "future earnings" for super balances above $3 million will be increased from 15% to 30%
Treasurer Jim Chalmers said the changes would make Australia's superannuation system "more sustainable and fairer" and called it a "responsible budget choice".
"This modest adjustment is consistent with the government's proposed objective of superannuation, to deliver income for dignified retirement in an equitable and sustainable way," he said.
Mr Hillier though said that while he, in principle, supports the idea of taxing money in super that's "more than you need for a dignified retirement", he's concerned with how this will work in practice.
"[AMP] has raised some concerns about the construct of the cap and how it's taxing unrealised gains," he told the Podcast.
"It seems to break some longstanding principles about how taxation works...you could have double taxation or even triple taxation.
"It does break some, I think sound principles, so we have called for perhaps some refinement about how that tax is calculated."
Picture by Diana Parkhouse on Unsplash
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