An account-based pension is a regular income you receive in retirement from your superannuation fund. It’s also called a Retirement Income account, or sometimes an allocated pension.
Regardless of the terminology, an account-based pension offers you a tax-effective way to receive a regular and steady income from your superannuation once you retire completely or reach preservation age.
Most Australians can start to access their super once they're aged 60.
Learn more about our Retirement Income acount.
Our Retirement Centre can provide one-on-one support and answer the questions you might be too shy to ask. Our services are available to all.
An account-based pension (or Retirement Income account, or allocated pension - they are all the same thing) works by converting your superannuation savings into a regular income stream.
When you set up an account-based pension, you get to choose:
The answer is that there is no practical difference between an account-based pension and an allocated pension — they are just different names for the same product. Allocated pension is old terminology for what superannuation funds now call an account-based pension. The account-based pension product at Equip Super is called a Retirement Income account.
The Australian government has set minimum drawdown rates for account-based pensions, meaning you have to withdraw a certain percentage of your account balance every year. You can choose to withdraw more than the minimum, it’s up to you.
Use our Retirement Lifestyle calculator to work out how much income you’ll need for your desired lifestyle in retirement.
If you’re eligible for or receiving the Age Pension, it’s important to know that your account-based pension is assessed by Centrelink under both the income and assets tests. Centrelink uses deeming rates to estimate the income you earn from your financial assets.
Find out more about Deeming rates.
Once your account-based pension has been established you can’t make contributions into the account. However, you can ‘reboot’ your pension account by rolling your funds back into a super accumulation account, which you can then make contributions to (eligibility restrictions apply).
Learn more about contributing to super in the pension phase.
An account-based pension offers many benefits, but like any financial product, it can come with some drawbacks — let’s take a look at both.
It provides you with a steady and predictable income stream, which can give you financial stability and peace of mind in retirement.
Once you turn 60, any withdrawals from your account-based pension are tax-free, making it a very tax-efficient way to draw on your superannuation savings. Note, there are some situations in which people under 60 can access an account-based pension, in these cases the income may be taxable.
You can choose how much you withdraw each year, as long as you meet the minimum drawdown requirements. This means you can adjust your income to suit your changing financial needs over time.
The remaining balance of your superannuation stays invested, meaning your savings may continue to grow even as you make withdrawals. If you’re in a Retirement Income account then any investment earnings are also tax-free.
Like any investment product, an account-based pension typically comes with fees, which can reduce the overall balance of your super.
It depends on your personal circumstances, financial goals, and how comfortable you are with managing your retirement savings. If you’re considering an account-based pension, here are some questions you might ask yourself:
Do you want regular income? An account-based pension provides you with a consistent income, helping you cover living expenses and maintain your lifestyle.
Do you want flexibility? With an account-based pension, you can choose how much you withdraw and when, giving you control over your income stream.
Do you need tax efficiency? Your withdrawals and investment earnings are tax-free, which can make an account-based pension a very cost-effective way to manage your super.
If you’re still unsure whether an account-based pension (Retirement Income account) is right for you, speak with one of Equip Super’s retirement experts. They can help you make informed decisions about your retirement income options.
A financial planner can take the guesswork out of retirement. Book a time for an initial conversation and we can help you map out your retirement goals, supporting services, and next steps.
This initial appointment is obligation free and available to all fund members at no additional charge.
Book a time to talk to our advice team or call us on 1800 065 753
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Centrelink assesses your account-based pension using deemed income rates, which estimates the income generated from the balance of your superannuation savings. This deemed income is used in Centrelink’s income test, along with the assets test (which considers your account-based pension balance), to determine your eligibility for the Age Pension.
Yes, if you are over the age of 65 you can open an account-based pension account, even if you’re still working. If you’re already retired but you choose to return to work, then your pension account can remain open.
An account-based pension is for individuals who have retired from the workforce or are over the age of 65, while a transition to retirement pension is designed for those aged between 60 to 64 who are still working but want to access their super as they approach retirement.
