What is an income stream (or allocated pension)?
Super runs on a basic principle: money goes in and, when you reach a condition of release such as retirement, money comes out.
A lump sum of money at retirement is a very exciting prospect. But what will you do with your final balance when you can access it?
The options are literally endless. From no-interest security nightmares like tucking it under the mattress, to putting it in a low-interest bank account or term deposit, to choosing to invest in shares, property, diamonds or space rockets, the sky is the limit.
However, all of those options carry financial risks, from your money losing value as it falls behind inflation under the mattress, to choosing poor performing shares or your money being lost in a failed space rocket venture (and everything in between). Without education and experience, it can be a risky game to manage your own life savings.
That’s where getting an income stream could help you. You can put your money with the super industry professionals you’ve trusted for years by investing some or all of your super money into an income stream (also known as an allocated pension). An ElectricSuper Income Stream is available to retiring ElectricSuper members and their spouses.
It’s a way to invest your money and have it managed by professionals, while you have easy access to your money.
What benefits does an Income Stream offer?
An income stream stands out as a special kind of investment for those who have reach preservation age and retired because:
- it lets you keep your money in the superannuation system, which can give tax benefits
- you can choose how you want your money invested (low risk/low return through to high risk/high return) without having to personally select investments
- receive a regular income from your money, direct to your bank account – you choose how much and how often
- access extra lump sum amounts whenever you need
- nominate your spouse to continue receiving your regular income payments if you die (reducing stress as well as provide tax advantages)
- online visibility of your account balance and your account’s performance
- the ability to change payment amounts and payment periods online in a secure website
- payments you receive are tax-free if you’re over 60
Knowing you have a regular income in retirement can help relieve some pressure
How do you get started?
To open an ElectricSuper Income Stream, you need to have at least $30,000 in your ElectricSuper super account. You don’t need to move all your super into the Income Stream (though you can if you wish). You can also add other money from other sources at the time you set up the account, such as from savings or other super accounts. Make sure that you have all your finances lined up when you are opening your account getting more money into super once retired can be tricky and there are rules that govern your ability to do this.
When you open an Income Stream account, you will need to nominate how much you would like to receive each year. You can choose any amount you like, as long as you take out at least the minimum specified by the government each year. You also choose how often you’d like to receive a payment. Choose from fortnightly, monthly, quarterly, twice a year or annual payments.
Whatever amount and payment frequency you choose, you can change it later in the secure section of the ElectricSuper website if you need to.
There is an administration fee for having an Income Stream. It’s 0.4% per year of your account balance, to a maximum of $800. It’s deducted from your account monthly.
What happens after your account is set up?
We will invest your Income Stream balance in line with your chosen investment option (or options). You can choose from Cash, Conservative Growth, Balanced Growth or High Growth (or a mix of them).
We will start making the regular payments you requested from your Income Stream account balance to your nominated bank account.
As you age, the minimum percentage you must take from your Income Stream will increase. You can see the minimum amounts on our website. We will contact you when your minimum percentage changes.
You can see your account balance in the online secure member area of the website. You will be able to monitor it increasing with positive investment returns and reducing with your regular payments, any lump sums you take, any negative investment returns and the administration fee.
In the online secure member area you can also change your payment frequency or amount any time. You can also access lump sums from your account balance. If you’re not online, you can also request these changes or lump sum payments using a form. It’s available in the Resources section of our website.
What’s next?
If you think that an Income Stream could help support your lifestyle in retirement, make an appointment to talk to our Member Services team. Even if you are years away from retirement, they can discuss the facts of an Income Stream with you and answer any questions about how it could work for you.