This year Accurium was again invited to participate in the Class Benchmark Report being given the opportunity to conduct an analysis of FY25 pension data sourced from Class.  

Our analysis brought to life risks and opportunities for SMSF professionals and trustees navigating planning for retirement. Our key findings are outlined below: 

A material number of legacy pensioners now have an opportunity to commute 

Regulatory changes from 7 December 2024 now allow full commutation of legacy pensions—including lifetime, life-expectancy, and market-linked pensions —offering retirees greater flexibility. 

We found that Class SMSFs held 199 life expectancy and lifetime pensions accounts, totalling $178 million across 183 members and 926 market-linked pensions totalling $710 million across 856 members. 

The defined benefit pensions generally do not pay a death benefit and restrict lump sum access to the balance, with only an annual pension payment allowed. The legacy pension reform provides advisers and trustees with the opportunity to consider the commutation of these income streams in enable new strategic estate planning and cashflow discussions. 

Commuting legacy pensions is complex and requires careful consideration of tax, ECPI, Age Pension entitlements, and transfer balance cap implications. Professional actuarial advice is strongly recommended. 

Death and taxes – older SMSF members thinking strategically 

Analysis of Class data compared to Australian Government Actuary life tables shows significantly fewer deaths among SMSF retirees than expected. For example, among 1,840 female members aged 85, only 16 deaths were recorded versus 104 expected, in FY22, FY23 and FY24. 

This discrepancy suggests many retirees exit their SMSFs before death. This is often by undertaking a strategy to withdraw the balance and gift to beneficiaries to reduce the tax payable on death benefits to non-tax dependents.  

Despite this expected impact on the data, the significantly lighter mortality, combined with much research linking higher socioeconomic status, wealth, and income, to longer lifespans, does support the hypothesis that SMSF retirees may live materially longer than the general population. 

SMSF professionals should plan for extended retirement horizons in retirement, especially for clients in good health. It is critical for clients to understand their longevity risk as underestimating it could leave clients with inadequate income during retirement. 

You can view the full report on the Class website here.