Draw Less Pension and Make the Nest Egg Last Longer

Earlier this year the Government was convinced that making retirees draw 4% plus from their hard earned savings in such a negative investment market was a bit tough. As a result the decision was made to reduce this requirement by half. So for those that had already drawn 2% of their 1 July 2008 pension balance, they didn’t have to take another penny this financial year.

This was welcome news to many and as a result people could reduce their spending in order to preserve the capital of their funds.

Given the continued uncertainty in the markets, the Government has again decided to halve the minimum drawdown amounts on account-based pensions for the 2009/10 financial year.

The following table shows the new minimum drawdown’s which apply:

Proposed minimum annual pension payments:

Age	Per cent of account balance (average)
55 - 64	2
65 - 74	2.5
75 - 79	3
80 - 84	3.5
85 – 89	4.5
90 – 94	5.5
95 +	7

So what’s the Strategy?

This one’s easy…if you think you can cut back your spending this year, then do so. Or if you really don’t need the cash from your allocated pension this year, then only take the reduced amount.

When your nest egg assets are down, it is best to avoid cashing them in to buy your veggies and other stuff. If you can, use your cash reserves or other savings first, and then, as things turn around you can pay yourself back from your pension fund.

Any advice given is of a general nature only and has not taken into account your objectives, financial situation or needs. Because of this, before acting on any advice, you should consult a financial planner to consider how appropriate the advice is to your objectives, financial situations and needs.