Understanding why funds are kept in in the accumulation phase of super instead of the pension phase

At the Results > Strategy summary step, in the summary section for a superannuation fund or SMSF, you may see funds appear in the accumulation phase, when you are expecting all funds to be in the pension phase. The table, below, lists reasons for why this may be happening. Although doing these roll backs may be mathematically optimal, they may not be practical or there may be other reasons you would like to prevent them in the modelling, so there are some options for preventing this at the Cash flows & Goals > Review super funds step.

Possible reason funds are in the accumulation phaseSuggestions for adjusting your case

They are drawing down assets outside super to meet their expenses, rather than drawing a pension from super.

The taxed, accumulation phase of super has a better return than any investments outside super, so Pathfinder is preferring the option with the best return.

Some ways you can change this include:

  • Increase their expenses to force a higher pension to be withdrawn
  • Add an investment outside super with a comparable return to the investment inside super (e.g. if they have a super fund with a 'conservative' profile, add a directly owned investment with a 'conservative' profile)
  • Prevent Pathfinder from rolling funds from pension phase back to accumulation phase For more see How to prevent rollbacks from pension phase to accumulation phase in a superannuation fund

They can meet their expenses with a pension phase balance that is less than their total super balance.

If they rollover all their funds to the pension phase, the amount they would need to withdraw would exceed their expenses, so they would have leftover cash that would need to be kept outside super.

Pathfinder is trying to maximise the Age Pension entitlement of the individual's older spouse.

For more information, see How to maximise an individual's Age Pension entitlement by keeping their spouse's funds in the accumulation phase.

If you do not want to take advantage of this strategy, you can prevent the rollbacks, for more, see How to prevent rollbacks from pension phase to accumulation phase in a superannuation fund

The individual is still making compulsory and/or voluntary deposits, and these need to be made to the accumulation phase of super. The best place to check if deposits are still being made is in the Detailed reports step. Then select the individual (left menu), then Cash flows > Super deposits summary.None. Pathfinder may rollover the amount as required the next financial year. You may wish to note to your clients that they can rollover the amounts sooner, though.

(SMSFs only) There is not enough liquidity in the SMSF assets

Once an asset is in pension phase, you often need to be able to seel it down because there are compulsory withdrawals.  If your instructions for the assets prevent from being sold, then Pathfinder may keep them in the accumulation phase because if the assets move to the pension phase then they will have to be sold and this will break your instruction.

Adjust the options for your assets in super so that they are more flexible, that is:

  • Avoid options that keep very high minimum balances - you can use the series builder to reduce the minimum balance at retirement (for more see How to increase a value in series builder) or use 
  • Avoid options like 'Leave alone' or 'Do not sell' - you change to 'Sell down' or 'Keep for X years' or   or 'Control by %'