“This is one of those funny quirks with the system. If you’ve got a client who has satisfied a condition of release by declaring that they have retired and there’s been a bit of growth and that’s been there for a few weeks, if I turn around and say I want to start a pension with 100 per cent of the balance, the trustee of the super fund is going to say that growth amount is preserved,” Mr Day said in a recent CFS podcast.

“The previous declaration of retirement only relates to the amount that was made unrestricted non-preserved when the trustee became reasonably satisfied.

“It may sound pedantic, but an easy way to resolve that is to simply satisfy a further retirement condition of release, so in that situation, the person would make a further declaration that they’ve ceased gainful employment in the past and that they intend not to be gainfully employed for 10 or more hours in the future.”

When advisers send through the application for the account-based pension for their client, Mr Day said it may be a good idea to send through that additional declaration just to cater for any growth that’s happened since the money was made unrestricted non-preserved.

Speaking in the same podcast, Colonial First State senior technical manager Tim Sanderson noted that where members have satisfied a retirement condition of release by ceasing gainful employments after age 60 because they’ve satisfied a further condition of release, they can’t simply rely on the original cessation of employment.

“You would either need to — particularly if you’ve gone back to work — cease the new gainful employment arrangement or make a declaration you’re intending not to work 10 or more hours a week in the future,” Mr Sanderson said.

Mr Day said he encountered a scenario a few years ago where a client changed jobs after turning age 60 and made their benefits unrestricted non-preserved.

“They did a recontribution strategy, so they took $300,000 out and then put it back in and what they were then wanting to do is to start an account-based pension and the problem was that $300,000, even though it was a cash-out recontribution, it was still a contribution. Therefore, the trustee preserved the $300,000,” he said.

The member thought that because they had ceased an arrangement of employment after turning 60, they’d be able to use it to start an account-based pension, Mr Day said.

“We said, well, you did that before you made the contribution, and so, unfortunately, that benefit will stay preserved unless you go and get yourself another job and cease that other employment arrangement. So, there are some lurking traps there,” he cautioned.