Beginners’ Guide: super funds

Figuring out which of the several ways to withdraw your superannuation funds can be one of the most difficult decisions to make for those who are about to retire.

Often, it involves trying to estimate how long you are going to live, and that’s no easy task for anyone.

According to the Australian Taxation Office, these are some of the strategies you can use to tap into your nest egg:

  • an account-based super income stream
  • a non-account-based super income stream
  • transition to retirement
  • early access to super.


Account-based super income stream
This payment was previously known as an allocated pension. It is derived from your existing superannuation fund, which continues to invest your savings in the same way it did while you were working.

If you opt for this payment, you must withdraw a minimum each year. Depending on your age, that minimum is between 4 per cent and 14 per cent of the total balance in the fund.

Not withdrawing the regulated minimum amount will likely see you taxed more.

There is, however, no upper limit for how much you can withdraw. You can continue to receive payments until there is no money left in your fund, after which you may be eligible to apply for a Centrelink Age Pension.

If money is left over, then those funds are generally transferred to the person you have nominated as your beneficiary. To be absolutely certain that your beneficiary will receive left-over super, however, you must fill out a binding nomination form. If you don’t, the legal system will wait to see if anyone other than your beneficiary makes a claim on your estate. If that happens, then your legacy may not be distributed according to your wishes.

Non-account-based super income stream
This payment is also known as a guaranteed annuity. If you choose this type of payment, your super balance will be transferred into a different fund which will pay you a guaranteed income for the rest of your life or for an agreed term, regardless of the size of the balance.

There are two main downsides to opting for a non-account-based income stream. The first is that you may not be allowed to change how much you withdraw, depending on your agreement.

The other is that because the income stream provider is taking on a greater risk – for instance, that you may live for a very long time – the fees it charges will be higher than if you choose an income stream from the original super fund.

Transition to retirement
If you are working part time and have reached your preservation age, it is now possible to also receive income from certain superannuation funds to supplement your wage.

Transition to retirement (TTR) payments can only be made from super funds that are in the accumulation phase and not from defined benefit funds.

The income cannot be taken as a lump sum, but only as regular payments.

As there are many complex tax considerations to take into account if you opt for a TTR income stream, it is vital to speak to your professional financial adviser before making a decision.

Early access to super
There are a number of life circumstances that make you eligible to access your superannuation funds before you retire. These include the need to:

  • pay for medical treatment for you or a dependant
  • make a payment on a loan to prevent you from losing your house
  • modify your home or vehicle for the special needs of you or a dependant because of a severe disability
  • pay for a funeral
  • cover certain costs if you are in financial hardship
  • or, if you have a terminal medical condition that two specialists agree will likely mean you have less than two years to live.


Information on the Department of Human Services website can help you determine if you are eligible to access your super early.

Have you had to access your super early, and for what reason? Are you likely to opt for a guaranteed income stream from an annuity? Or are you happy to withdraw amounts from your super fund until they run out and you become eligible for an Age Pension?

All content on YourLifeChoices website is of a general nature and has been prepared without taking into account your objectives, financial situation or needs. It has been prepared with due care but no guarantees are provided for the ongoing accuracy or relevance. Before making a decision based on this information, you should consider its appropriateness in regard to your own circumstances. You should seek professional advice from a financial planner, lawyer or tax agent in relation to any aspects that affect your financial and legal circumstances.