C10/2005 Income streams assessment by the Death Processing System

Purpose of Instruction

The purpose of this Departmental Instruction is to provide information about changes to the automatic assessment of Defined Benefit and Purchased income streams by the Death Processing System (DPS) upon the death of the owner.

These changes will take effect from 1 April 2005.

Defined Benefit income streams

In cases where there is a surviving spouse and the Reversionary Beneficiary field in PIPS has been set to 'Yes', the death of a Defined Benefit income stream owner causes DPS to include a proportion of the original income in the survivor's pension assessment, pending a full post-bereavement period review.

The proportion depends on the income stream provider.

To ensure the correct proportion is included in the survivor's assessment from the date of death, all Defined Benefit providers listed in the PIPS drop-box have been recently contacted.  Details of their policy regarding the reversion of the Defined Benefit paid by them to a surviving partner upon the death of the owner have been obtained.  These details have now been incorporated in the DPS business rules.

Old business rules in DPS

Two-thirds of the Gross Income Per Fortnight was held in the pension assessment of the survivor if the Defined Benefit was one of the following;

• ComSuper (CSS & PSS) or ComSuper (DFRDB & MSBS);
• SA State - South Australian Superannuation Board State;
• ETSA - Electricity Trust of South Australia;
• SA Police – Police Pensions Fund;
• WA State – Government Employee Super Board; and
• Tas State – Superannuation Office.

Note: For the SA supers, 2/3 was held only if the couple were legally married.

Half of the Gross Income Per Fortnight was held in the pension assessment of the survivor for all other Defined Benefits.

New business rules in DPS

There are three general outcomes that can apply depending on the Provider's Defined Benefit scheme.

• Two-thirds of the Defined Benefit reverts to the surviving partner.
• A set percentage (other than two-thirds) of the Defined Benefit reverts to the surviving partner.
• The amount on reversion is dependent upon a number of factors and cannot be known until the individual Defined Benefit conditions or contract is analysed.  In these cases, 50% of the Defined Benefit should be retained if there is a surviving spouse and where the Reversionary Beneficiary field has been set to “Yes”. (as per existing rules).

Attachment A

Attachment A identifies the individual outcome for each Defined Benefit provider and these outcomes have been programmed into DPS.

Purchased income streams

In cases where there is a surviving spouse and the Reversionary Beneficiary field in PIPS has been set to 'Yes', then up to now, DPS has retained half the Assessed Income P/F and the Assessed Asset value for Purchased income streams in the survivor's assessment, pending a full post-bereavement period review.

Purchased asset-test exempt income streams with a commencement date on or after 20 September 2004 will only have 50% of their derived asset value assessed. A new classification type of Asset Test Exempt 50% has been created for all products purchased from 20 September 2004.  DPS will now recognise this new type and apply appropriate business rules if there is a surviving adult in the assessment.

New business rules – Lifetime, Allocated and Fixed

Upon death of the owner, pending a full post bereavement period review, half the Assessed Income and Assessable Asset are retained by DPS if:

• the term type is “Lifetime”, “Allocated” or “Fixed”;

• there is a surviving spouse; and
• the Reversionary Beneficiary field has been set to 'Yes'.

New business rules – Life Expectancy or Market Linked

Upon death of the owner, pending a full post bereavement period review, the full Assessed Income and Assessable Asset are retained by DPS if:

• the term type is “Life Expectancy” or “Market Linked”;
• there is a surviving spouse; and
• the Reversionary Beneficiary field has been set to 'Yes'.

Note:  If there is a “savings provision” active – the old rules still apply.

Attachment B

Attachment B contains a full summary of how DPS will operate for all Purchased income streams.

Note:  For Asset Test Exempt 100% income streams no asset amount applies.

Post- Bereavement Review

It should be stressed that the amount assessed by Death Processing System is temporary based on the best information available.

The actual income stream details for the surviving partner must be obtained by requesting a new Income Stream Schedule (Form D0563) as part of the post- bereavement review.

Manual Death Processing

Any case that DPS is unable to automatically process will be identified on the DPS Processing Report and will require manual processing through PIPS.

Any such case that contains a Defined Benefit or Purchased income stream with a surviving spouse in the assessment will require that the income stream(s) is data collected in accordance with the appropriate assessment as outlined in Attachments A and B.

Contact officer

The Income Support Branch contact officer for this Departmental Instruction is:

Mark Hodgson Assistant Director, New Systems Development who can be contacted on 68456

Percentage to be held in assessment upon death

The following tables indicate the fraction or percentage that should be held in the pension assessment upon the death of the owner of the product if there is a surviving spouse and where the Reversionary Beneficiary field has been set to “Yes”.

Two-thirds of Defined Benefit (ie. Retained amount = Defined Benefit P/F x 2)

                                                                                                                3

DEFINED BENEFIT PROVIDER

ComSuper (CSS & PSS)

ComSuper (DFRDB & MSBS)

(NSW) Coalsuper Super Services

(NSW) Energy Industries Super Scheme

(NSW) Local Government Super Scheme

(VIC) Port of Melbourne Authority

(VIC) State Bank of Victoria

(VIC) State Employees Retirement Board

(VIC) Vision Super prev Local Auth

(SA) Electricity Trust of S A

(SA) SA Police Super Scheme

(SA) Super S A

(WA) Government Employee Super Board

(TAS) State Superannuation Office

ANZ Group (Aust) Staff Pensions Scheme

BP Superannuation Fund

Burns Philp Group Superannuation

Colonial Group Staff Super Scheme

Prudasco Australia Super Limited

Reserve Bank of Aust Officers Super

Smorgon Steel Superannuation Plan

Wesfarmers Staff Retirement Fund

50% of Defined Benefit (ie. Retained amount = Defined Benefit P/F )

            2

DEFINED BENEFIT PROVIDER

(VIC) Emergency Services Super (MFB)

(VIC) Health Super

(VIC) State Superannuation Board

(VIC) VEI Superannuation Fund

(QLD) Coal&Oil Shale Mining Ind Super

(QLD) State Government Super Office

A W Edwards Superannuation Plan

Alcatel Australia Superannuation Plan

Ampol Superannuation Fund

Anglican Superannuation Australia

Ansett Superannuation Plan

Arnotts Group Superannuation Fund

Australia Post Superannuation Fund - see note (i) below

BHP Staff Superannuation Fund

Caltex Australia Superannuation Fund

CCA Group Superannuation Plan

Deseret Benefit Plan for Australia

Esso Employee Retirement Benefit Plan

Exxonmobil Superannuation Plan

Herald Pension Fund

National Aust Bank Group Super Fund

NRMA Superannuation Plan

Royal & Sun Alliance Staff Super Fund

SA Brewing Superannuation Fund

Salvation Army

Sara Lee Superannuation Fund

Shell Australia Superannuation Fund

Tubemakers Employee Super Fund

Unilever Australian Super Fund

Unisuper (SSAU and TESS)

WA Newspapers Superannuation Plan

Westpac Staff Superannuation Plan

Zurich Group Superannuation Fund

Certain Percentage of Defined benefit retained (ie. Retained amount = Defined Benefit P/F x Percentage)

DEFINED BENEFIT PROVIDER

PERCENTAGE RETAINED

Uniting Church in Aus Beneficiary Fund

80%

CSR Staff Superannuation Fund

75%

Commonwealth Bank Officers Super Fund

67% (not two-thirds)

(NSW) State Authorities Super Board

62.5%

AMP Officers' Provident Fund

60%

AXA Australia Staff Super Plan

60%

Flexible Benefits Super Fund aka ORICA

60%

Nestle Australia Pension Fund

60%

Important Note

The Death Processing System assessment is temporary.  The actual income stream details for the surviving partner must be obtained by requesting a new Income Stream Schedule (Form D0563) before completing the post bereavement review

If the income stream

Term Type is:

and the Reversionary Beneficiary field is set to:

then the Death Processing System will:

Life Expectancy

Yes

Retain the original income stream details for the surviving partner and 100% of the Assessed Income P/F and Assessed Asset.

Market Linked

Yes

Lifetime

Yes

Retain the original income stream details for the surviving partner and temporarily reduce the Assessed Income P/F and Assessed Asset by 50% until the actual details are obtained and updated.

Allocated

Yes

Fixed

Yes

Life Expectancy

No

Delete the entire income stream record.

Market Linked

No

Lifetime

No

Allocated

No

Fixed

No

Important Note

The Death Processing System assessment is temporary.  The actual income stream details for the surviving partner must be obtained by requesting a new Income Stream Schedule (Form D0563) before completing the post bereavement review