Account-Based Pension

What is an account-based pension?

An account-based pension, or allocated pension, is a regular, tax-effective income stream that you can purchase using your superannuation, after you reach preservation age.

You must withdraw money from this account each year, and the minimum you must withdraw per year is calculated based on your account balance and age. Income payments can be made monthly or less frequently.

Similarly, to your super fund, an account-based pension is a form of investment account. Your investment earnings from an account-based pension are tax-free on a balance between $1.6 million and $1.9 million, with a 15% tax on transition to retirement pensions from 1 July 2017 onwards.

It’s important to note that an account-based pension bought with your superannuation is not the same thing as the Age Pension provided by the government to eligible low income earning retirees. If you have an account-based pension, this may affect your eligibility to receive the Age Pension.

Once you retire and reach your preservation age, you can choose to convert all or part of your superannuation into an account-based pension – or withdraw your whole superannuation balance as a lump sum.

Here at Concise Advice we work with our clients to provide tailored advice to ensure you are maximising your retirement benefits be it with an accounts based pension, age pension or a combination of the two to enable our client to live a comfortable retirement.