The pension transfer balance cap increased from $1.9m to $2m on 1 July 2025.
Key points
- The pension transfer balance cap imposes a limit on the total amount a person may have in the tax exempt retirement phase in their super fund. This means the super fund pays no tax on the investment earnings attributable to the assets supporting the pension account.
- For anyone commencing a pension for the first time on or after 1 July 2025 will have a personal pension cap of $2M.
- For those who are already in pension phase who haven’t previously reached or exceeded their cap will receive a proportional increase based on their remaining cap space.
Example 1
Peter commenced a pension with $850,000 on 1 July 2022 when the pension cap was $1.7M. He therefore used 50% of his pension cap. When the pension cap increased by $200k to $1.9M on 1 July 2023 he was entitled to indexation of 50% or $100k, thereby increasing his personal pension cap from $1.7M to $1.8M. Then again, when the pension cap increased by $100k from $1.9M to $2M on 1 July 2025 this entitles him to 50% indexation or an extra $50k into his pension cap, taking his personal transfer balance cap to $1.85M. This enables Peter to commence a second pension with up to $1M. This is on the basis that Peter had not started any new pensions in the intervening period between July 2022 and July 2025.
Example 2
Whereas in a second example, Mary also commenced a pension on 1 July 2022 but her pension commenced with $1.7M being the total pension transfer balance cap limit at that time. As she used 100% of her cap then, she is not entitled to any future indexation increases in the pension cap.
Please contact us if you have any queries about your own pension cap circumstances.
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