How to include an account-based pension (ABP)

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Overview

Pathfinder can model an existing or new account-based pensions (ABP). Pathfinder's default behaviour is to start an ABP if it will maximise the net wealth at the end of the analysis and the individual is eligible to do so, which usually means Pathfinder will start an account-based pension if it is required to meet their living expenses in retirement. Pathfinder can work out how much to roll over and how much to draw as a pension. It will keep within all the rules including their eligibility to draw a pension based on age and retirement date, the minimum withdrawal amount and transfer balance caps. As a general rule of thumb, Pathfinder will typically withdraw the minimum required pension and then make lump sum withdrawals if more funds are required.

In superannuation funds, it is possible to adjust the default behaviour (for example, start an ABP sooner), however, for SMSFs, you will need to Contact Optimo Financial.

Entering data for an account-based pension step-by-step

Pathfinder is very good at keep tracking of all the rules around starting a pension and lump sum withdrawals, and taking best advantage of them, so even if you know what you'd like the strategy to be, it's often less data entry to let Pathfinder optimise, and then only choose specific pension options once you've seen the result Pathfinder calculates.

	Step	Details
1	Data required at the Current situation step	Pathfinder's optimisation can handle account-based pensions more easily if the case includes the following information: Current balances for superannuation funds and SMSFs. All expenses, including annual living expenses - Pathfinder will calculate withdrawals to match the living expenses Salary (if relevant) If the individual has already started an ABP, Pathfinder also requires accurate transfer balance cap data. For more, see How to enter existing Transfer Balance Cap information For more details, see Entering Data in Pathfinder and Minimum data required for Pathfinder.
2	(if required) Enter the existing ABP balance, if the individual has already started one	If the individual has already started an ABP: Go to the Super & Trusts sub-step (under Current situation step on the top menu) and find the individual's superannuation fund or SMSF The individual's current pension phase balance should be entered in the Pension phase balance field: On Superannuation funds, this field is on the investment(s) inside the fund In SMSFs, this is in the on the SMSF in the 'Member' section Fill in 'Super transfer balance information' section on the Individual. NOTE: you do not need to enter how much the individual is currently drawing as a pension because Pathfinder will calculate this for you.
3	Check your data at the Retirement planning sub-step (under the Cash flows & Goals step on the top menu)	Go to the Retirement planning sub-step (under the Cash flows & Goals step on the top menu) Make sure the Retirement age field is filled in - This is used to determine when the individual is eligible to start an ABP. Even if the Individual has already retired, you should enter a value (even though it's in the past), otherwise Pathfinder will assume the individual is not retired. Include or exclude a transition to retirement income stream (TRIS), as required for your case. For more see v1 How to include or exclude a Transition to retirement income stream (TRIS, formerly known as TTR).
4	(Initial modelling) Make sure you're allowing Pathfinder to calculate the account-based pension and lump sum withdrawals.	For your initial scenario, it's a good idea to let Pathfinder calculate the pension and lump sum withdrawals (you can adjust it later, but if you let Pathfinder calculate it first, you might find that it's done what you wanted without you needing to steer it). For more about copying scenarios, see How to make another scenario for comparison For SMSFs, currently, there are no options to control pensions, so you don't need to do anything further. For Superannuation funds: Go to the Review super funds sub-step (under the Cash flows & Goals step on the top menu) Go to the Cash flows & Goals > Review super funds step and find the super fund: If the Custom options or Options for withdrawals fields are set to , leave them as they are. This will cover letting Pathfinder calculate the TRIS and you don't need to choose any further options. If Options for withdrawals has not been set to 'Control withdrawals/pension', then the Pension payments (TRIS/ABP) field will be visible and you should set it to .
5	Solve and check your initial results	Solve your scenario. For more, see v1 How to solve a scenario to get results For more information on reviewing results, see the 'Results' section, on this page. Some things you may want to check are: If there is a cash shortfall. For more troubleshooting, see How to investigate and fix cash shortfalls The year the ABP is started and how much it is. If the first year of the ABP is a small amount, you may wish to start the ABP in the next year. If Pathfinder is keeping any funds in the accumulation phase after the pension has been started. There are a variety of reasons this may occur, so you might want to leave it or you may want to force Pathfinder to prevent roll backs and/or force Pathfinder to rollover all funds to the pension phase. However, before adding a restriction, it is good to nderstand why Pathfinder is keeping funds in the accumulation phase, for more, see Understanding why funds are kept in in the accumulation phase of super instead of the pension phase If any individual is receiving the Age Pension in later years and it is a small amount, you may wish to exclude the Age Pension. For more see, How to include or exclude the Government Age Pension Also note: If the individual starts a TRIS, Pathfinder will automatically convert it to an ABP, once the individual is eligible to do so
6	Adjust your scenario, if required	To adjust the pension or lump sum withdrawals from an SMSF, please Contact Optimo Financial, as options are not currently available in the interface. To adjust the pension or lump sum withdrawals from a superannuation fund: Copy your scenario, so you can make adjustments in the copy and compare how your adjustments affect the projected outcomes. To adjust the superannuation fund, there are options to control when to start a pension, how much to rollover and lump sum withdrawals: Go to the Review super funds sub-step (under the Cash flows & Goals step on the top menu) and find the super fund For the Custom options field, choose 'More options' Then for the Options for withdrawals field, choose 'Control withdrawals/pension' Then for the Pension payments (TRIS/ABP) field choose 'Control pension payments'. This will show the fields for: Starting a pension and how much to rollover Preventing roll backs from pension phase to accumulation phase Adjust other fields in the section, if you like. There is help under each field to explain what it does. Notes: Avoid choosing options that will force Pathfinder to exceed the transfer balance cap when rolling funds over to the Pension phase. If the transfer balance cap is reached in your case, it will be reported in the 'Solve events' box, and then you can check the Detailed reports. If you try to force rollovers that exceed the transfer balance cap, it is recommend that you check the results carefully because Pathfinder may make commutations or violate constraints. If an individual reaches their transfer balance cap, it's much easier to set 'Pension payments (TRIS/ABP)' to (robot).
7	Check your results again	See the 'Results' section of this page Compare the scenario with your adjustments against the scenario where you allowed Pathfinder to calculate the pensions

Reading the results for an account-based pension

If funds are being kept in the pension phase, and you were expecting them to be rolled over to the pension phase, see Understanding why funds are kept in in the accumulation phase of super instead of the pension phase.

In the results, you can see the account-based pension in the following places:

At the Strategy summary step:
1. There is a section for each superannuation fund which will show the total balance and how it's split between the pension phase and accumulation phase. The chart is a good place to check if funds are being kept in the accumulation phase after the ABP is started.
2. There is a Retire section for each individual that will list if an account-based pension is started
At the Cash flows & Action items step:
1. In the Cash flows report, the ABP will be listed in the Revenue section with a row called 'Superannuation income stream'
2. In the Action items, there will be action items for:
  1. drawing an ABP, including the minimum withdrawal amount
  2. rolling funds to the pension phase
  3. rolling funds from the pension phase back to the accumulation phase
  4. When a TRIS is converted to ABP
In the Detailed reports step, you can see an ABP in the following reports:
1. Consolidated > Cash flows: There's a line for "Superannuation income stream" (note that this will be the total ABP payments if it is a couple)
2. Consolidated > Cash flows (detailed): There's a line for "Superannuation income stream" for each individual
3. If the ABP is drawn from a retail or industry super fund:
  1. Full details of the ABP pension are here: "Individual name" > "Super fund/SMSF name" > "Super fund/SMSF name" Pension > Pension payments
4. You can also check the accumulation/pension phase balances under:
  1. (Individual) Super fund balances - this shows end of year balances only
  2. (Individual) > Super fund (or SMSF) - this shows the balances at the start of they year, after rollovers and at the end of the year.
5. (Individual) > Cash flows > Superannuation transfer balance account: This shows you how close the individual is to the transfer balance cap

For more information, see Retirement Planning and Build Super results.

Overview

Reading the results for an account-based pension

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