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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.

 

 

Section 5J(1) of the VEA defines a purchase price, in relation to an income stream, as the sum of the payments made to purchase the income stream (including amounts paid by way of employer and employee contributions), less any commuted amounts.

 

 

The governing rules of an income stream are either:

  • a trust instrument,
  • other document or legislation, or
  • combination of them,

governing the establishment and operation of the income stream.

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