Members turning 65, ceasing full-time work after reaching their ”preservation age”, or meeting other ”conditions of release” may want to transfer part or all of their superannuation accumulation account to a pension account or a transition to retirement account, in order to draw regular income to fund their retirement or top-up reduced income in semi-retirement.
Mclowd now supports converting part or all of an accumulation account to a pension or transition to retirement account.
Before establishing the new account, you need to calculate the member’s account balance. That requires correctly assessing the member’s share of income and tax up to the day prior to the day the pension is to start. To do that, you need to go to Financial Periods on the Mclowd Settings Menu and create a new ”Interim Period”. The period will extend from the 1st July in the financial year in which the pension is to commence to the day immediately prior to the day the pension is to start.
Once the Interim Period is created, Mclowd will require you to go through each of the steps you normally follow to close a financial year. You will be closing the Interim Period, and you won’t be able to enter further transactions after the end date you enter for the Interim Period, so make sure you have entered all transactions up to the date the pension is to begin.
After finalizing the period end calculations, you will be asked if you wish to post the journals to the General Ledger. Doing so will update the member account. Once that is done, you can go to the Member Details section of Fund Setup, from the Settings Menu, and select the member. Click ADD NEW ACCOUNT FOR MEMBER and select the account type (Pension or Transition to Retirement). Enter the Commencement Date. Then click RETRIEVE INTERIM BALANCE to retrieve the Member Balance.
You can then fill in details of the account and Mclowd will advise minimum and maximum withdrawals and how much you need to withdraw in the current year to comply with law. Once you have saved the new account, you will be able to make pension payments from it.
For detailed step-by-step instructions for converting an accumulation account to pension or transition to retirement, refer to Chapter 13: Member Account Conversions in the Mclowd User Guide, or download the chapter as a PDF file at https://www.mclowd.com/support/wp-content/uploads/member-account-conversions.pdf.
DO NOT create a member pension or transition to retirement account without first proceeding through the steps to calculate and retrieve the Interim Member Balance. You will not be able to pay a pension if you have not correctly converted at least part of the member balance from accumulation phase. The exception is, of course, if the Member was already in Pension or Transition to Retirement phase at the time the Fund was established and the opening balance was allocated to a Pension or Transition to Retirement account.