Account-based pensions

An account-based pension offers regular, flexible and tax-effective income from your superannuation.

You can get one when you reach ‘preservation age’ (between 55 and 60). It lasts as long as your super money does, but is not a guaranteed income for life.

How an account-based pension works

An account-based pension (or allocated pension) is a regular income stream bought with money from your super when you retire.

Typically, you get to choose:

  • how much you want to transfer to the ‘pension phase’ (subject to the balance transfer cap)
  • the size and frequency of your payments (within the minimum or maximum allowed)
  • how you want your super invested (through your fund)

Preservation age

You can get your super when you retire and reach your preservation age. This is between 55 and 60, depending on when you were born.

Minimum amount of money to withdraw

To help manage the affects of COVID-19, the Government is temporarily reducing superannuation minimum drawdown rates for account based pensions by 50 per cent. This will reduce the need for retirees to sell investment assets to fund minimum drawdown requirements.

Contact us to discuss how these changes will affect your payments.

For the 2019-20, 2020-21 and the 2021-22 financial years the minimum drawdown is:

Age Annual payment as % of account balance
55—64 2%
65—74 2.5%
75—79 3%
80—84 3.5%
85—89 4.5%
90—94 5.5%
95+ 7%

Frequency of payments

You can arrange for monthly, quarterly, half-yearly or annual payments. Payments continue until the account balance runs out or you take what’s left as a lump sum.

How long your pension lasts

How long your account-based pension lasts depends on:

  • the amount of super you transfer to your pension account
  • how much you take in payments each year
  • super investment earnings
  • how much you pay in fees

Your eligibility for the Age Pension depends on your age, assets and income. Your account-based pension forms part of the income and assets test to assess your eligibility.

Your account-based pension after you die

Money left in your super account when you die will go to your beneficiary or your estate.

  • If you nominated a ‘reversionary beneficiary’ — they continue to get your pension payments until the account runs out. If they’re a child, they’ll get pension payments until age 25, then the balance as a lump sum.
  • If you nominated a spouse or dependant as beneficiary — they can take your death benefit payment as a pension or lump sum. A non-dependant beneficiary can take your benefit payment as a lump sum.

Pros and cons of an account-based pension

Consider the pros and cons to decide if an account-based pension is right for you.


  • Flexible pension payments — you can choose a payment arrangement to suit you (within the minimum or maximum allowed).
  • Add to Age Pension — if you’re eligible, you may be able to use your account-based pension payments to top up your income.
  • Tax-effective — you don’t pay tax on pension payments from age 60. If you’re age 55 to 59, the taxable part of your pension is taxed at your marginal tax rate, less a 15% tax offset.
  • Lump sum — you can withdraw all or some of your money at any time.
  • Investment earnings are tax-free — you can choose how your fund invests your money, and returns are added to your account.
  • Estate planning — there may be money left for your beneficiary when you die.


  • Impact on Age Pension – your account-based pension forms part of the income and assets tests, so it may affect your eligibility.
  • Investment earnings may go down in value — depending on market performance.
  • Longevity risk – there’s no guarantee your super balance will last as long as you do.

For more information on account-based pensions, speak to us on 03 9725 9078.