What Is an Account-Based Pension?
You've spent decades building your superannuation.
Then retirement arrives.
What happens next?
For many Australians, one option is to convert some of their accumulated super into an account-based pension.
An account-based pension is designed to turn retirement savings into a regular income while keeping the remaining balance invested.
Understanding how it works can be an important part of retirement planning.
How Does an Account-Based Pension Work?
Once you've met the relevant rules for accessing your super, you may be able to transfer some of your super balance into an account-based pension.
Rather than withdrawing the entire amount at once, your money remains invested and you draw an income from it.
Depending on the product and applicable rules, you can generally choose:
how your pension is invested
how often you receive payments
how much you withdraw, subject to minimum withdrawal requirements
whether you make additional lump-sum withdrawals.
This can provide considerable flexibility during retirement.
Is an Account-Based Pension the Same as Super?
The money still sits within the superannuation system, but it moves from the accumulation phase into the retirement phase.
During accumulation, the objective is generally to build retirement savings.
During retirement, the objective changes: your super now needs to help fund your lifestyle.
There can also be important tax differences between the two phases.
What Are the Tax Benefits?
One of the significant attractions of retirement-phase superannuation is its tax treatment.
Subject to the relevant rules and limits, investment earnings supporting a retirement-phase income stream are generally exempt from tax within the fund.
For many people aged 60 and over, payments from a taxed super fund may also be tax-free personally.
There are important exceptions and limits, so individual circumstances matter.
How Much Can You Transfer?
There is a limit on how much super can be transferred into the retirement phase.
This is known as the transfer balance cap.
The general transfer balance cap is $2.1 million from 1 July 2026, although your personal transfer balance cap may differ depending on your history.
Amounts above your available cap may need to remain in accumulation or be dealt with in another permitted way.
Do You Have to Withdraw Money?
Yes.
Account-based pensions have minimum annual withdrawal requirements based on your age.
For example, the standard minimum is currently 4% a year for someone under 65 and 5% for someone aged 65 to 74.
The percentage increases at older ages.
This doesn't mean you must spend all the money you withdraw. It simply means the minimum pension payment must leave the pension account.
Will the Money Last Forever?
Not necessarily.
An account-based pension does not guarantee income for life.
How long your money lasts will depend on factors such as:
your starting balance
how much you withdraw
investment performance
fees
inflation
how long you live.
This is why retirement planning should involve more than simply opening a pension account.
Investment Strategy Still Matters in Retirement
Retirement doesn't necessarily mean all your money should move to cash.
For someone retiring at 65, their savings may need to support them for another 20, 30 or more years.
That creates a balancing act.
You need sufficient stability and liquidity to fund spending, while potentially retaining enough growth exposure to help your capital keep pace with inflation and longevity.
Account-Based Pension Advice in Perth
For retirees and pre-retirees in Subiaco and across Perth, an account-based pension can be an important part of turning accumulated super into retirement income.
But the bigger question is how that pension fits alongside your cash, investments, property, Age Pension eligibility and spending requirements.
Retirement planning isn't simply about reaching a particular super balance.
It's about creating a sustainable income strategy from the assets you've spent your working life building.
This article contains general information only and does not take into account your objectives, financial situation or needs.