accumulation growth and transfer to pension mode

Good evening, an accumulation fund can operate over a non defined period until the holder transfers the fund into a income stream mode and commences withdrawals to fund retirement.
I read in some documents how quickly some funds reduce.
Does a Income providing account, let's call it a pension account, continue to grow based on unit prices and the fluctuations of market once it's in pension mode. My accumulation account aims at growing 3% above CPI as a base target. Should I draw out LESS than that amount per year, shouldn't I my account have actually grown for the year?
Once in pension mode will my account keep growing when it was called an accumulation account?

 

Account balances will continue to fluctuate in accordance with the market. Income is (mostly) taxed at 0% once in pension mode so it should grow a little faster than a comparable accumulation account.

There are predefined minimum withdrawals you must make, these are a percentage of the balance based on your age. If your fund performs well you could expect your balance to grow when making minimum withdrawals, bad years can really hurt.

Minimum pension payments for 2017/2018 year (and for 2016/2017 year)

*I'm not an expert on this stuff, hopefully some food for thought.

 

and that is why i stepped away from the formal framework ,( right from the start )

i am hoping to use the div. income to fund the retirement , the current plan to shift currently 100% DRP plans to 50% DRP 50% cash payout ( allowing some capital growth to resist inflation )

obviously some div paying shares ( like BHP) don't have a DRP ..so that is some potential for cash income ( for the life of the holding )

the PRG take-over has created some wrinkles that was already in partial DRP mode

but at least i have the flexibility to adapt to such changes

i could not see how cash balances parked in bank deposits ( and other interest bearing securities ) were ever going to resist inflation while being drawn down to exceed inflation by 5% ( or more ) implies you are taking excessive risk ( at the very time you shouldn't be )

 

Hi Tallis,

The only difference between a pension account and an accumulation account is the fact that you can start drawing from the pension account and the tax treatment of earnings and CGT (dependent on meeting a condition of release for superannuation) of the pension account.


The amount you should draw really depends on the stage of life you are at and whether you want the account to continue to grow using a strategy aligned to your risk preference. You can either choose to invest in growth assets such as shares and property, defensive assets such as cash and fixed interests or a mix of both.

Generally funds allow you to take withdrawals from the cash component which means that if markets are bad you don’t have to sell growth assets.

One of the things we work out for clients is how long their money will last if they take out certain amounts each year factoring in any aged pension you may be eligible for.

 

If your income stream > net returns then your capital will reduce, which means similar market performance will result in even less net returns until the capital goes to zero.

If your super is entirely in pension phase, there is the added advantage that your net returns are 15% more than what they would be in accumulation phase assuming the same market performance.