Complying Pensions
Background
Funds paying lifetime and fixed term pensions are required to have annual actuarial certificates. These certificates must show whether there is a high (70%) probability of their being sufficient. These certificates can be used to “segregate” assets into those supporting “current pension liabilities” If assets are not segregated, an annual actuarial certificate is needed to determine the proportion of income that applies to current pension liabilities. This portion is tax free.
In addition, the practice can supply certificates prior to pension commencement. For large pension funds, one normally expects a proportion of members to die each year. In small funds, death is “binary” – the member either dies or does not. To allow for this, the practice normally recommends initial pension levels such that if investment and inflation assumptions are realised and no death occurs in the first three years, the 70% certainty will not be breached at the end of those three years.
Information needs
The information that the practice usually needs to do any work for self managed superannuation funds depends on the segregation or otherwise of the fund’s assets and the nature of the pensions provided. It includes:
| Segregated assets | Unsegregated assets or first year | Account based | Lifetime | Fixed term | |
| Trust Deed (a) | y | y | y | y | y |
| Draft accounts (b) | y | y | |||
| Journals (contributions and benefits) | n | y | |||
| Dates of birth | (c) | y | n | ||
| Valuation date pension $ per annum | y | y | |||
| Reversionary proportion | n | y | n | ||
| Indexation rate | n | y | y | ||
| Next indexation date | n | y | y | ||
| Fixed or guaranteed term ends | n | y | y | ||
| Pension creation minutes | n | y | y | ||
| Investment Policy | n | y | y | ||
| Previous actuarial reports | (d) | (d) | (d) |
(a) In the case of second or subsequent assignments, a statement to the effect that there has been no change in the trust deed is sufficient.
(b) Year end or commencement of pension.
(c) Only required if certificate of maximum and minimum pension is needed.
(d) Last annual or triennial certificate and (for first review) reports dealing with the creation of pensions.
Timing
Certificates are normally produced within five business days of receipt of all information. Urgent tasks will be completed within two business days and attract a 15% surcharge.
See the frequently asked questions for more information regarding complying pension certificates.