Explained: When and why to start an account-based pension

You may be able to draw an income from your superannuation before you retire.

How to tap into your super savings

If you are considering retiring or transitioning to retirement, you have the option of opening an account-based pension.

This will provide an income stream based on your superannuation savings, but only as long as you have reached preservation age.

Preservation ages depend on when you were born, as follows: 

An account-based pension pays income in retirement or if you are still working, it can supplement your wages.

Some working individuals may be able to draw income from an account-based pension and salary-sacrifice an amount from their wages into superannuation to legitimately lower their taxes.

The account-based pension is opened with a lump sum from your super account.

There are some conditions that must be met: for example, permanently retiring from the workforce after reaching preservation age, reaching age 65 or becoming totally and permanently disabled.

If you intend to keep working, you need to start a transition to retirement pension (TTR) in order to access part of your super through an account-based pension.

Under these circumstances, the sum you deposit in the account must be a minimum of four per cent and no more than 10 per cent of your super balance. You cannot withdraw a lump sum if you are still working. Rather, the amount that goes into your account-based pension creates an income stream.

Your TTR pension can be rolled back into your super accumulation account at any time, according to MoneySmart.

Account-based pensions are not guaranteed to last for a set period of time. How long your pension lasts will depend on how much you withdraw each year, the investment returns you receive and the amount of fees you pay.

To calculate how long your account-based pension might last, use the calculator on the MoneySmart website.

Before deciding to open an account-based pension, speak to an adviser from your superannuation fund in addition to an accredited, independent financial adviser specialising in retirement matters.

Would you consider opening an account-based pension before fully retiring? If you have already done this, how did it help to improve your cashflow?



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    14th Nov 2018
    Depends on what type of investments you have outside super
    Best to draw from taxable sources and lower yield sources first but it’s always depending on how those investments have performed during and in the preceding years
    As a general rule I withdraw from a number of sources just skimming off some of the returns for the year leaving principal to grow
    Only time I take a lump sum including principal is if I get the urge to splash on a new car which is once in about 4 years
    pedro the swift
    14th Nov 2018
    A new car every four years! well , lucky you! My current vehicle is 28 years old and still going strong. Prior to that had car for 30 years. I tend to keep my cars for as long as possible.
    Even now when I could afford a new car , there doesn't seem to be any that I would really get excited about owning. They all look like they came out of the same sausage factory and with all that modern electronic crap that is just a fault waiting to pop up.
    Prefer a car I can fix on the roadside if I have to. Anyway there aren't too many mechs. who can fix modern cars, just swap parts till fault goes away.
    14th Nov 2018
    Pedro - most new cars now come with 5 year 175,000 km warranty and free roadside assistance

    Trading in every few years , you get good resale value so end up paying only 50% or thereabouts on the new vehicle
    14th Nov 2018
    Pedro, hang onto your older car as long as it is practical to do so. One good thing about the older ones is that a mobility walker will easily fit into the space behind the front seat which doesn't always apply to new(er) models unless you buy a larger car than is practical for an older couple.
    15th Nov 2018
    when I bought a new second hand car my mates said welcome to this century I said at least the old one was all metal

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