# Balance Transfer Cap - Changing Super Pension Fund



## Bill M (21 July 2018)

I am looking at changing my account based super pension fund. How does the balance transfer cap actually work? Do I need to commute the pension into an accumulation fund and then transfer it to the new fund? How will the balance cap be worked out?

Lets look at this example. If a pension has a 500 K balance cap attached to it as from 1 July 2017 and is commuted to an accumulation fund so it can be transferred out to a new pension fund will that 500 K cap still be attached to it?

What I don't want to happen is to have 2 lots of 500 K attached to the cap. There are limited clear instructions on the web for me to check. Anyone have any links or ideas on this? Thank you.


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## systematic (21 July 2018)

Superguide is usually a decent place to start. There are some links on the page that I’m linking to that will hopefully get you closer to an answer. 
https://www.superguide.com.au/superannuation-topics/1-6-million-transfer-balance-cap

https://www.superguide.com.au/retirement-planning/liberals-1-6-million-cap-pension-start-balances


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## HelloU (21 July 2018)

disclaimer: I did not really understand the question so not sure if this link helps..........
https://www.ato.gov.au/Super/Self-m...nical/Funds--starting-and-stopping-a-pension/


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## HelloU (21 July 2018)

cos in general once in pension phase you do not go back to accumulation (unless you previously hit the cap when it was first introduced and u were already in pension phase - then the excess gets paid out or reverted - ur choice)


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## HelloU (21 July 2018)

if u were under the cap when it was first introduced (and in pension phase) then you will ALWAYS be under the cap for that account.........
hope something in there helped......


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## Bill M (21 July 2018)

HelloU said:


> cos in general once in pension phase you do not go back to accumulation



Thanks for the links guys. When I asked my new super fund "what do I do with my pension from the other super fund" They said that most likely you will have to have that account placed into the accumulation fund and then transfer that to the new fund.

There must be a way of changing the pension fund provider. Surely once a pension is started and you don't like your provider you can change? 

How would that affect the transfer cap? This is what I am trying to work out.

A lot of articles tell you about the cap but not how to change funds and what effect it has on the balance transfer. Thanks.


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## sptrawler (21 July 2018)

It is a good question bill, from what I understand of the balance transfer cap, it was a snapshot of existing pensions and those commenced as at 1/7/2017.
Any pension at that time had a cap of $1.6m, anything above that had to be rolled out, or rolled over into accumulation i.e taxed.
If you have an account based pension, that already hit the $1.6m cap, I would think the $500k rolled over couldn't be rolled into pension phase untill the cap has increased or the capital has diminished.
Just my take on it, but it is a good question, maybe Junior or Craft will know the exact interpretation.


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## sptrawler (21 July 2018)

Re reading your posts Bill, if you have two pension funds with $500k in both, they can be transfered into one account, as both combined is well under the  transfer balance cap of $1.6m.


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## HelloU (21 July 2018)

Bill M said:


> Thanks for the links guys. When I asked my new super fund "what do I do with my pension from the other super fund" They said that most likely you will have to have that account placed into the accumulation fund and then transfer that to the new fund.
> 
> There must be a way of changing the pension fund provider. Surely once a pension is started and you don't like your provider you can change?
> 
> ...



I am still a little unclear.......if you are talking about moving pension acc to another fund manager cos you hate your old one then yes, no issues (you must have got the new phone person). As the cap date has already passed then it has no changes here for that account. Once the date passed your balance can now increase to $1 bazillion if you are in shares and stuff........but you CANNOT add capital once the acc has moved to pension phase......you can increase balance through dividends and interest and earnings and SP increases (so balance can go up after the cap date to be above $1.6M with no problems but NEW CAPITAL cannot be introduced)

Hope that is what you are getting at. Gotta go now as my blue pills seem to be working now.....


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## Bill M (22 July 2018)

Thanks for the help. I think it is better that I try to give an example.

Opened a Pension Fund 3 years ago with Super Fund A. The snapshot on 1 July 2017 is 500 K (part of balance cap towards the $1.6 M)

Now 3 years later I am not happy with Super Fund A and want to dissolve that Pension and start a new Pension with Super Fund B.

What will become of the the transfer cap with Super Fund A? Does that simply carry over to Super Fund B? 

Super Fund B has 10K funds in it and is in accumulation phase. It is waiting for Super Fund A to be dissolved and transferred over to Super Fund B. 

Once it is in Super Fund B the aim will be to start a new Super Pension with 510K. 

What will be my balance transfer cap value?

Can this be done?


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## HelloU (22 July 2018)

what are fund B saying to you about pension transfer?....they are the ones who will action the process


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## Bill M (22 July 2018)

Fund B said that I should talk to Fund A about the transfer. They said I will most likely have to go from pension account back into an accumulation account within Fund A. Once this is done then it will be ready to transfer to Fund B.

I have not gone through this process yet as there are some term deposits that need to mature. I also need to be sure of what actually happens, thanks.


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## HelloU (22 July 2018)

Hmmm........I am stumped......generally if you are not transferring the actual assets but only the equivalent cash balance it should not be a real issue - once you have fulfilled the minimium annual pension drawdown requirements and paid any close out fees.......but one thing to consider is any current deeming exemptions that you may currently hold....you will prolly lose them. Good luck with all that.


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## sptrawler (22 July 2018)

Bill M said:


> Thanks for the help. I think it is better that I try to give an example.
> 
> Opened a Pension Fund 3 years ago with Super Fund A. The snapshot on 1 July 2017 is 500 K (part of balance cap towards the $1.6 M)
> 
> ...




I would say you can roll super fund A into B and as you say start a $510k pension account. The transfer balance cap won't be a problem as it is still well below the $1.6mil.
Your transfer balance cap starts the year you commenced your pension, that's my understanding anyway.
This year the cap is still $1.6, it will be indexed, but who knows when, 2018/2019 is still $1.6m.

https://www.ato.gov.au/Rates/Key-superannuation-rates-and-thresholds/?page=29

Like I said before Junior or Craft, will probably be able to answer it, with more authority than I.


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## Junior (23 July 2018)

Bill M said:


> I am looking at changing my account based super pension fund. How does the balance transfer cap actually work? Do I need to commute the pension into an accumulation fund and then transfer it to the new fund?




You cannot transfer from a pension directly into another pension.  You must commute back into accumulation phase, then do a super rollover, then commence a new pension.

If the pension was commenced a while ago, some caution should be exercised here as you may lose out on potential Centrelink benefits, due to the grandfathered treatment of older account based pensions for means testing.  It depends on your personal circumstances and the date the pension account was set up.



Bill M said:


> How will the balance cap be worked out?
> 
> Lets look at this example. If a pension has a 500 K balance cap attached to it as from 1 July 2017 and is commuted to an accumulation fund so it can be transferred out to a new pension fund will that 500 K cap still be attached to it?




Your $1.6million Transfer Balance Cap works like a general ledger with debits and credits.  So if your total account based pension balance(s) were $500k at 1/7/2017, then your remaining cap is $1.1mill.

Now, if you were to commute a pension back into accumulation, whatever the balance of the pension is at that time will be ADDED BACK onto your cap.  So let's say your pension account is worth $450k and you commute back to accumulation.  Your Transfer Balance Cap will then be $1.55mill.  When you commence a NEW pension with the $450k, the Cap will come back down to $1.1mill again.

I hope this makes sense.


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## bngood (23 July 2018)

^^ Good explanation by junior but as junior says this is really dependent on your personal circumstances.  I wouldn't do anything before talking to your own accountant who knows your circumstances.  Once you do something it can't be undone. The new rules are complicated.


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## sptrawler (23 July 2018)

Junior said:


> You cannot transfer from a pension directly into another pension.  You must commute back into accumulation phase, then do a super rollover, then commence a new pension.
> 
> If the pension was commenced a while ago, some caution should be exercised here as you may lose out on potential Centrelink benefits, due to the grandfathered treatment of older account based pensions for means testing.  It depends on your personal circumstances and the date the pension account was set up.




Junior, from memory, doesn't all your tax free convert to taxable, when you commute then re start.
I'm not sure on this, just thought I read it somewhere, maybe you can clarify that for me.


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## Bill M (23 July 2018)

Junior said:


> Now, if you were to commute a pension back into accumulation, whatever the balance of the pension is at that time will be ADDED BACK onto your cap. So let's say your pension account is worth $450k and you commute back to accumulation. Your Transfer Balance Cap will then be $1.55mill. When you commence a NEW pension with the $450k, the Cap will come back down to $1.1mill again.
> 
> I hope this makes sense.



Hi Junior, thank you for your response and clear explanation. Yes it makes sense and I understand it now.

I started my pension in October 2015. I am not entitled to any Centerlink payments as I am several years away from receiving any old aged pension. I don't know if there will be any effect on me or not. 

I would think that the substantial savings by merging the 2 funds would out weigh any Centerlink payments that I may or may not get in the future. The new fund has lower fees and better cash term deposit rates, by merging the two super funds I will be cutting out one set of fees. Cheers and thanks to all those who have helped out.


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## Bill M (23 July 2018)

sptrawler said:


> Junior, from memory, doesn't all your tax free convert to taxable, when you commute then re start.
> I'm not sure on this, just thought I read it somewhere, maybe you can clarify that for me.



From what I have read I think it goes like this. The proportions stay the same, but may change to reflect the proportions in the accumulation fund. If it was 50/50 (taxed and untaxed) then that amount would stay the same. However if the accumulation account has different taxed and untaxed proportions then it needs to be recalculated by the super fund. I can't see how non concessional contributions can become taxable as a result of a commutation. If that was the case I would never contemplate doing what I am thinking of doing. I could be wrong though.

EDIT, I found this.
The taxable and tax free components of the commutation payment will have the same proportions as those determined for the components of the separate interest that supported the pension when the pension commenced.
https://www.ato.gov.au/Super/Self-m...nd-stopping-a-pension/#Pensionisfullycommuted


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## Junior (23 July 2018)

sptrawler said:


> Junior, from memory, doesn't all your tax free convert to taxable, when you commute then re start.
> I'm not sure on this, just thought I read it somewhere, maybe you can clarify that for me.




The taxable/tax free proportions should stay the same.


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