Market-linked pensions are now fully commutable

However, this opportunity to escape the restrictions of market-linked pensions is strictly limited and will close on 6 December 2029. So, this is an all or nothing opportunity-the pension must be fully terminated or not terminated at all.

Both trustees of superannuation funds which are paying market-linked pensions and members who are currently receiving market-linked pensions should consider whether to escape the confines of these pensions and liberate the account balance currently supporting them.

But first, the complexities and issues of terminating market-linked pensions must be considered and is the subject matter of this article.

Hyphenated or not?

First and most importantly-are they or are they not hyphenated? If you follow the legislation there is no hyphen, but if following style guides it should be 'market-linked pensions' as is used in this article.

What are these hyphenated pensions?

Market-linked pensions could be issued on or after 20 September 2004 by all types of complying superannuation funds and incorporated three significant features in relation to the superannuation regime which operated from 1994-from the introduction of flat dollar reasonable benefit limits­-until 2007 when the 'Costello Simplified Super' changes [under the Tax Laws Amendment (Simplified Superannuation) Act 2007] commenced on 1 July 2007.

Complying pensions

The first significant feature was that these pensions were treated as being 'complying pensions', potentially enabling the member to choose the more generous pension reasonable benefit limit-rather than the lump sum reasonable benefit limit (RBL)-applied when determining if the benefit was excessive and the amount of that excess. The pension reasonable benefit limit was twice the size of the lump sum limit.

Centrelink asset test

These pensions could, if additional requirements were satisfied, have special Centrelink asset test treatment, being 50% asset test exempt. Before 20 September 1998 all superannuation pensions, apart from allocated pensions, were asset test exempt. On and from 20 September 1998 only certain kinds of defined benefit pensions were asset test exempt.

Defined benefit pensions restructured

Defined benefit pensions could be restructured as market-linked pensions while retaining assets test exempt status. This simply meant that either the entire pension balance was excluded from the asset test (100% exempt status) which previously applied to defined benefit pensions, or half of the pension balance was excluded (50% exempt status) from the Centrelink asset means test.