Account-based pensions

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 60
1 July 1963 - 30 June 1964 59
1 July 1962 - 30 June 1963 58
1 July 1961 - 30 June 1962 57
1 July 1960 - 30 June 1961 56
Before 1 July 1960 55

To access super you must also have met a condition of release unless you are setting up a transition to retirement pension.

How much do I have to withdraw from my account-based pension each year?

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.

Age Annual payment as a
% of account balance
55-64 4%
65-74 5%
75-79 6%
80-84 7%
85-89 9%
90-94 11%
95+ 14%

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 exhausted.

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 account.

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 pension?

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 pensions

An account-based pension is a common way to continue to receive a regular income after you have retired from work. Benefits include:

  • You decide on the payment amount (within minimum and maximum allowed)
  • 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 your account
  • You can choose how your money is invested by the fund manager
  • There may be money left over for your estate

Older woman driving after taking out account-based pensionCase 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 Pension.

Drawbacks of account-based pensions

There are a couple of things to be aware of before you start an account-based pension:

  • 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 do

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.

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Last updated: 14 Feb 2019