Legacy Pension Exit Window: What Retirees Need to Know

The Federal Government has introduced new rules to make it easier for people with legacy pensions to restructure their superannuation. These changes came into effect on 7 December 2024 and apply for the next five years.

Our Morrows Superannuation team have outlined the changes below.

What Are Legacy Pensions?

Legacy pensions are older types of super income streams, including:

  • Lifetime pensions
  • Life-expectancy pensions
  • Market-linked pensions (also called legacy pensions in SMSFs).

These pensions have traditionally been restrictive because they don’t allow members to make significant changes or access their funds easily.

What’s Changed?

The new rules give eligible members more flexibility. For a limited time, you can:

  1. Convert your legacy pension into an accumulation account in your super fund.
  2. Start a more flexible account-based pension.
  3. Withdraw your funds as a lump sum (if allowed by your fund’s rules).

Before this change, trying to restructure these pensions often resulted in tax complications due to unallocated reserves in the super fund. These new rules simplify the process and reduce the risk of breaching contribution caps.

Who Is Eligible?

You can exit a legacy pension if:

  • It started before 20 September 2007 or was converted from another product that started before.
  • It’s a lifetime pension, life-expectancy pension, or market-linked pension (unless it’s from a large defined benefit fund).

Why It’s Important

These changes give you more control over your superannuation but deciding whether to restructure or keep your pension requires careful planning. Deciding to make changes could also affect how your super is distributed as part of your estate plan.

How Morrows Can Help

Our team of superannuation advisors at Morrows can help you understand your options, minimise risks, and ensure your super aligns with your retirement and estate planning goals.

Contact us today to discuss how we can support you in making the right decisions for your and your family’s legacy.

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