When do you have to start withdrawing your super?

YourLifeChoices member Les has a question about when – or if – compulsory withdrawal of superannuation begins.

Q. Les

I know there is an age when you can start to withdraw from superannuation, but is there an age at which you must start drawing on your super even if you have retired. We currently have enough cash funds to survive on.

A. The answer is yes – if you have a superannuation pension account. There is no age at which you are obliged to begin withdrawing from your accumulation account. In fact, you can leave it untouched until you die if you so wish, but sound financial advice would suggest that is not the best place to leave those funds as you age.

The rationale for the minimum drawdown from a super pension account is to encourage older Australians to spend in retirement rather than pass their savings on to beneficiaries.

Minimum drawdown rates progressively increase with age for those with a pension account, though were halved as a COVID relief measure. We explain the rates here.

If you have an accumulation account only, new legislation coming into effect on 1 July means you can keep making contributions up until age 75 without having to meet the requirements of the work test. Since you’ve said you’re already retired, this wouldn’t have been a problem for you anyway.

Read: Can I claim a single pension if I live with an estranged partner?

After age 75, super funds can generally no longer accept contributions but you are still not obligated to withdraw it.

If you do decide not to withdraw your super, it may have an impact on your ability to access the Age Pension.

Age Pension eligibility is based on an assets test and an income test in which all of your assets (super and non-super), as well as your income sources, are assessed to determine how much, if any, Age Pension payments you are entitled to receive.

Read: How not to fall foul of this Centrelink rule

Your superannuation falls under both the assets and income tests.

Under the assets test, the total balance of your super is counted towards the asset limits, which are currently set at these rates for a full pension:

Your situationHomeownerNon-homeowner
Single$270,500$487,000
A couple, combined$405,000$621,500
A couple, separated due to illness, combined$405,000$621,500
A couple, one partner eligible, combined$405,000$621,500

To receive a part pension, the asset limits are as follows:

Your situationHomeownerNon-homeowner
Single$599,750$816,250
A couple, combined$901,500$1,118,000
A couple, separated due to illness, combined$1,063,500$1,280,000
A couple, one partner eligible, combined$901,500$1,118,000

Under the income test, your superannuation is deemed to earn an income based on the Centrelink deeming rate, which is currently 0.25 per cent for the first $44,500 and 2.25 per cent for anything above that.

Read: Are interest-free loans considered gifting by Centrelink?

Ultimately, your super will affect the amount of Age Pension you receive, yet no more so than how your bank account balances affect your Age Pension entitlements. And again, if you have enough funds to survive on then this shouldn’t be an issue.

As always, speak to a financial adviser to see if this is the most effective way to fund your retirement.

Disclaimer: 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.

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