How your superannuation affects the Age Pension

For many of us, other than the family home, superannuation is the biggest investment we will make in our lifetime.

The purpose of superannuation is compulsory savings. You save money while you’re working so it can be invested and grow to help look after you in retirement.

Your employer pays some of your wages into a superannuation fund on your behalf, usually at a lower tax rate than you’d normally pay.

The trade-off for accessing super’s tax-friendly environment is that you have limited access to the funds. You generally have to wait until you meet a release condition before you can access the funds, such as turning a certain age and retiring.

If you want to access your super at an earlier age, you need to contact your fund. The Australian Taxation Office (ATO) is a great place to find information about super as well. Go to and search for ‘superannuation’.

How Services Australia assesses your super depends on your age.

Superannuation isn’t counted in the income or assets test for people under Age Pension age, which is currently 66 years and six months.

For most people, once you reach Age Pension age, your super becomes assessable as a deemed financial asset whether you’ve chosen to access it or not.

Deeming is a set of rules used to work out the income created from your financial assets. It assumes these assets earn a set rate of income, no matter what they actually earn. The main type of financial assets include:

  • savings accounts and term deposits
  • managed investments, loans and debentures
  • listed shares and securities
  • some income streams such as an account-based pension
  • some gifts you make.

If your investments give you more income than the deemed rate, or you’re drawing down more from an account-based pension, the extra amount doesn’t count as income and won’t affect your rate of pension.

I’m often asked what happens to your payments if you take a small lump sum from your superannuation. Is it treated as income?

If you’re under Age Pension age, taking a lump sum out of super and putting it in the bank is moving it from an exempt asset to one that we’ll assess. It isn’t treated as income, but how we assess it will depend on what you do with it.

If you’ve taken out $20,000 and put it in the bank, then we won’t assess the $20,000 as income, but your bank account has grown by $20,000 and that may cause a change in your rate.

You need to let Services Australia know if you’ve taken a lump sum out of your superannuation fund and what you’ve done with the money. You can use your online account or the Express Plus Centrelink app to update your investment details and bank balances.

To find out how, go to and search for ‘update bank details’.

Hank Jongen is general manager at Services Australia.

Do you understand how lump sum withdrawals from your account-based pension affect your Age Pension payments? Do you have a question for Hank? Email [email protected] or share your thoughts in the comments section below?

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