Pay yourself a regular income
An account-based pension (also known as an allocated pension) is
a regular income stream, purchased with money you have accumulated
in super, after you have reached preservation age.
How account-based pensions work
An account-based pension is started with a lump sum from a super
fund. This is usually done by transferring money from an
accumulation super account to an account-based pension account,
after you have reached your preservation age.
Your preservation age depends on when you were born.
|Your date of birth
||Minimum age you can access super
|From 1 July 1964
|1 July 1963 - 30 June 1964
|1 July 1962 - 30 June 1963
|1 July 1961 - 30 June 1962
|1 July 1960 - 30 June 1961
|Before 1 July 1960
To access super you must also have met a condition of release unless you are
setting up a transition to retirement
How much do I have to withdraw from my account-based pension
You will have to withdraw a minimum amount each year, depending
on your age, see the table below for details. If you have met a
condition of release the maximum you can withdraw is the account
balance, however if you are still working and are using a
transition to retirement pension you will be limited to withdrawing
a maximum of 10% of the balance each year.
||Annual payment as a
% of account balance
How often are income payments made?
Income payments can usually be made monthly, quarterly,
half-yearly or yearly and continue until the account balance is
Can I withdraw a lump sum from my account-based pension?
Yes. You can withdraw some or all of your pension account,
unless it is a transition to retirement pension. You can also roll
it back into a super accumulation
How long will my account-based pension last?
Account-based pensions are not guaranteed to last for a set
period of time. How long your pension lasts will depend on how much
you withdraw each year, the investment returns you receive and the
amount of fees you pay. Our account-based pension calculator will
give you an idea of how long your account-based pension will last,
but remember it's only an estimate.
See how long your account-based pension might last.
Account-based pension calculator
What happens to my account-based pension when I die?
If there is money remaining in your account when you die it will
be paid to your beneficiaries or your estate.
If you have nominated a reversionary beneficiary then that
person will continue to receive your pension payments until the
account runs out and they'll be able to manage the account just as
you could before your death. If you nominate a child as your
reversionary beneficiary they will only be able to receive pension
payments until they reach age 25, and then any remaining balance
will be paid to them as a lump sum.
If your beneficiary is a spouse or dependant they may
choose to receive your death benefit payment as a pension or a lump
sum. Non-dependent beneficiaries will only be able to receive super death
benefits as a lump sum.
Will I get the Age Pension if I also have an account-based
Your Age Pension entitlement is determined by an income test and
an assets test. Your pension balance will be counted as an asset
under the asset test. The balance will also be deemed under the income test.
The test that results in the lowest Age Pension being paid to you
is the one that Centrelink will apply.
If you started your account-based pension before 1 January 2015,
and were already receiving a Centrelink pension or allowance, then
only part of your pension income will be assessed under the income
test. If you commenced your pension on or after 1 January 2015 then
the whole balance will be deemed for income test purposes.
Contact a Centrelink Financial Information Service
officer or your financial adviser to see whether your income will
affect your Age Pension. See social security for more details.
New transfer balance cap
On 1 July 2017 a cap was put on the amount of money that can be
transferred to a tax-free account-based pension. The new limit is
known as the 'transfer balance cap' and it has initially been set
at $1.6 million. Details of the change can be found on the Australian Tax Office (ATO) website.
Benefits of account-based
An account-based pension is a common way to continue to receive
a regular income after you have retired from work. Benefits
- You decide on the payment amount (within minimum and maximum
- You won't pay tax on pension payments from age 60
- If you are aged 55-59, the taxable portion of your
account-based pension will be taxed at your marginal tax rate less
a 15% tax offset
- You don't pay tax on investment earnings
- You can access a lump sum at any time
- Your balance will increase as investment earnings are added to
- You can choose how your money is invested by the fund
- There may be money left over for your estate
Case study: Nadia takes
out an account-based pension
Nadia is 66 and single. She rolled her super into an
account-based pension on 1 July 2013. The current balance is
$150,000. Based on her age, she must take out a minimum of 5% of
her account balance, which is $7,500, during the financial year.
Nadia draws down $800 every month to supplement her Age
There are a couple of things to be aware of before you start an
- Your investment earnings are not guaranteed and may fluctuate
in line with market performance depending on the investment option
you have chosen
- There is no guarantee your super will last as long as you
Account-based pensions are a good choice if you
want a regular, flexible and tax-effective income. But they do not
guarantee an income for life. Seek financial advice from a licensed
adviser if you're not sure if this is the right choice for you.
Last updated: 22 Oct 2018