What are unrestricted non-preserved benefits?

What are unrestricted non-preserved benefits?

Unrestricted non-preserved benefits are portions of your super fund that you don’t need to meet any conditions to access, so they can be paid to you at any time. You will typically only have this type of benefit if you are retired and have chosen to leave money in your super fund.

What’s the difference between preserved and non-preserved benefits?

By default, most of your super fund will be made up of preserved benefits earned during your working life. These preserved benefits are locked away until you reach the conditions for release, at which point they become unrestricted, non-preserved benefits that are available to be withdrawn.

Timothy Collins, a financial adviser at Talem Wealth, told Canstar the superannuation system has two phases: accumulation and pension. He said that the easiest way to think about the two phases is to picture buckets:

1. The accumulation phase: “The accumulation phase is a bucket with an open top; you can put money in (within contribution rules), but you generally cannot take money out.”
2. The pension phase: “When you commence a pension phase account, you effectively put a lid on that bucket and a tap on the side. You can’t add any more money to that account, but you can draw money out as an income stream or lump sum.”

How can you access unrestricted non-preserved benefits?

In order to access your super fund, you need to meet certain conditions of release and have reached the preservation age for retirement. That age is determined by the year in which you were born, and is 60 for everyone born after 1964.

If you meet those conditions, the preserved benefits in your super become unrestricted non-preserved benefits, readily accessible for you to withdraw or to help set up a pension for your retirement.

For example, you may choose to use only part of the money in your super fund to set up an account based pension for your retirement. You will only be able to withdraw from that pension subject to any minimum drawdown conditions, but that will be tax-free if you are over age 60 and retired or over age 65. You can’t contribute any more to that pension fund, but you can set up multiple pensions if you like.

You can still access the balance that’s left in your super fund at any time, as that is considered an unrestricted non-preserved benefit.

Other ways to unlock your preserved benefits

Other ways your preserved benefits can become unrestricted and non-preserved include:

• when you reach age 65 (even if you haven’t retired)
• if you become permanently incapacitated
• if you suffer from a terminal condition and are expected to pass away within two years
• at death

You may also have unrestricted non-preserved benefits from other sources, such as employment termination payments that were rolled into your super fund prior to 1 July, 2004.

While the rules governing if your benefits are preserved or not may seem complicated, it’s easy to find out if you have any unrestricted non-preserved benefits. Just check your latest super fund member statement, and any applicable benefits will be clearly listed as such.

Cover image source: Michael Leslie/Shutterstock.com