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Pension Valuation Factors for Defined Benefit Income Streams

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Last amended: 13 May 2008

Description of pension valuation factors

The pension valuation factor used depends on the:

The indexation rates range from less than 1% to 8%. The pension valuation factors reduce as the age of the pensioner increases. Each factor covers an age range of 5 years:

  • starting at 20 years of age or less, and
  • finishing at the age ranges 96 to 100, and 100+.
Use of pension valuation factors

Pension valuation factors are used to determine the asset value of asset tested defined benefit income streams. However, under Commission determinations 10, 11 and 12 of 1998 and 5 and 6 of 1999, all defined benefit income streams are asset test exempt.

How to use the pension valuation factors

The following table shows how to select the appropriate indexation rate column from the pension valuation factor table.

Note: Where the income stream is indexed at greater than 8% each year, the pension valuation factor will be determined by the Secretary of FaHCSIA.

If the income stream is indexed...

Then the pension valuation factor will be...

to movements in salary

listed in the 7% but less than 8% column of the following table.

to movements in a price index published by the Australian Government Statistician

listed in the 6% but less than 7% column of the following table.

at discretion of trustees of a super fund which has been in existence or has been making payments for less than a continuous period of five years

listed in the 6% but less than 7% column of the following table.

at discretion of the trustees of a super fund which has been in existence or has been making payments for more than a continuous period of five years

calculated by first adding together the indexation factors declared by the trustees over the past five years and then dividing the result by five to get the five year average. The relevant pension valuation factor will be listed in the column which corresponds to the five year average.

Pension valuation factor table

The following table shows the pension valuation factors for pensioners according to their age next birthday and the indexation rate for a pensioner's income stream.

Age

Indexation rate for person's income stream

8%

7% but less than 8%

6% but less than 7%

5% but less than 6%

4% but less than 5%

3% but less than 4%

2% but less than 3%

1% but less than 2%

Less than 1%

20 or less

34

27

22

19

16

14

12

11

10

21-25

32

26

22

18

16

14

12

11

10

26-30

30

25

21

18

16

14

12

11

10

31-35

28

23

20

17

15

13

12

11

10

36-40

26

22

19

16

14

13

11

10

9

41-45

23

20

17

15

14

12

11

10

9

46-50

20

18

16

14

13

11

10

9

9

51-55

18

16

14

13

12

11

10

9

8

56-60

15

14

12

11

10

10

9

8

8

61-65

12

11

11

10

9

8

8

7

7

66-70

10

9

9

8

8

7

7

6

6

71-75

8

7

7

7

6

6

6

5

5

76-80

6

6

5

5

5

5

4

4

4

81-85

4

4

4

4

4

4

3

3

3

86-90

3

3

3

3

3

3

3

2

2

91-95

2

2

2

2

2

2

2

2

2

96-100

2

2

2

2

2

2

2

2

2

101+

1

1

1

1

1

1

1

1

1


A factor used to calculate the notional asset value of a defined benefit income stream.

A defined benefit income stream is an income stream  where the payments are not fully determined by a purchase price. Instead, payments are made with reference to a set formula based on:

  • the person's salary before retirement,
  • years of service, and/or
  • the governing rules of the income stream.

 

 

According to section 5J(1) of the VEA, an income stream includes:

  • an income stream arising under arrangements that are regulated by the Superannuation Industry (Supervision) Act 1993; or
  • an income stream arising under a public sector scheme (within the meaning of that Act); or
  • an income stream arising under a retirement savings account; or
  • an income stream provided by a life insurance business (within the meaning of the Life Insurance Act 1995); or
  • an income stream provided by a friendly society (within the meaning of the Income Tax Assessment Act 1996); or
  • an income stream designated in writing by the Commission for the purposes of this definition, having regard to the guidelines determined under subsection 5J(1F) of the VEA;
  • but does not include any of the following:
  • available money;
  • deposit money;
  • a managed investment;
  • a listed security;
  • a loan that has not been repaid in full;
  • an unlisted public security; or
  • gold, silver or platinum bullion.

 

 

Department of Families, Housing, Community Services and Indigenous Affairs.   Now known as the Department of Social Services.