4.9.5.50 Pension Valuation Factors for Defined Benefit Income Streams

Summary

This topic contains the pension valuation factor table used to calculate an asset value for defined benefit income streams (1.1.I.70) that are NOT EXEMPT from the assets test. This topic also covers the following matters:

  • a description of pension valuation factors,
  • the pension valuation factor table, and
  • treatment of cases NOT included in the table.

Explanation: The pension valuation factors were developed by the AGA's office. They have been set out in a disallowable instrument rather than legislation so they can be revised to allow for changes in variables.

Example: Changes in life expectancy or interest AGA rates.

Act reference: SSAct section 9(1)-'life expectancy', section 1120 Value of asset-tested income streams that are defined benefit income streams, section 1120(3)-'pension valuation factor'

Policy reference: SS Guide 4.9.2.30 Income Test Assessment of Asset-Test Exempt Income Streams, 4.9.3.20 Assets Test Assessment of Asset-Tested Income Streams

Description of pension valuation factors

The pension valuation factor used depends on the:

  • indexation rate of the defined benefit income stream, AND
  • age of the income support recipient.

The indexation rates range from less than 1% to 8%. The pension valuation factors reduce as the age of the income support recipient 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+.

Pension valuation factor table

The following table shows the pension valuation factors for income support recipients according to their age next birthday and the indexation rate for an income support recipient's income stream.

Age Indexation rate for person's income stream
8% 7% or over to under 8% 6% or over to under 7% 5% or over to under 6% 4% or over to under 5% 3% or over to under 4% 2% or over to under 3% 1% or over to under 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

Treatment of cases NOT included in the table

The following table shows the treatment of cases NOT included in the pension valuation factor table. Indexation rates mentioned are those in the pension valuation factor table.

If a defined benefit income stream is indexed… Then the pension valuation factor is…

at a rate above 8% each year:

- singly, or

- as a member of a class of defined benefit income streams,

determined in writing by the Minister for DSS, on a case-by-case basis.

to salary movements, according to the governing rules of a superannuation fund,

Example: Movements published by the Australian Statistician.

is taken to be indexed at a rate of at least 7% but under 8%.
to movements in a price index published by the Australian Statistician, is taken to be indexed at a rate of at least 6%, but under 7%.
at the discretion of the trustees of a superannuation fund, according to the governing rules of the fund,

the indexation rate is taken to be either:

- the average rate determined by the trustees over the 5 years before the assessment year, OR

- IF the fund has been in existence, or making income stream payments to the income support recipient, for LESS than 5 years, at least 6%, but under 7%.

Act reference: SSAct section 9(1)-'governing rules', section 9(1)-'superannuation fund'

Last reviewed: 6 February 2017