Treasury shuts door on defined-benefit pensions

Self-managed superannuation funds will no longer be able to use defined-benefit pensions. The pensions were a popular tax minimisation and estate planning strategy for wealthy individuals. Defined-benefit pensions in SMSFs allow wealthy individuals with savings beyond tax-concession limits to “compress” them and qualify for the $1.3 million pension reasonable benefit limit. In practice, an individual running their own super fund would value their assets low enough to meet that limit. Defined-benefit pensions in SMSFs also allowed estate planning benefits not available in commercially available pensions, such as the build-up of excessive reserves.