When you retire, your super does not have to stay as a single balance or be withdrawn as one lump sum. An account-based pension is the most common way to turn your super balance into a stream of regular income. By moving money from your super into a pension account, you can draw payments from it on a schedule that you choose.
How It Works
Your money remains invested inside the pension account. You decide how it is invested, and the balance moves up and down with the markets and reduces by the payments you take out. You also choose how often you are paid, such as monthly or fortnightly.
The payments are not guaranteed for life. How long your balance lasts depends on how much you draw and how your investments perform over time. That is the central trade-off with this type of pension: you keep flexibility and control, but you carry the investment risk.
Minimum Payments Apply
Each year, you must draw at least a minimum amount from the account, which is set as a percentage of your balance and increases with your age. Beyond that, you generally decide how much more to take. Drawing too little can leave your income short of what you need, while drawing too much can shorten how long the balance lasts.
When Can You Start One?
Access generally depends on reaching your preservation age and meeting a condition of release, such as retiring. Some people start an account-based pension at the point they stop work. Others use a different arrangement at the start, to draw an income while still working part-time.
How Is an Account-Based Pension Different From a Lump Sum?
A lump sum leaves you managing the money yourself, with no structured income
A pension account sets out regular payments with minimum drawdowns
Tax treatment can differ between the two, and the detail depends on your age and circumstances
What Else Is Worth Thinking About?
The pension itself is only one part of the picture. How much you move into it, how it is invested, and how it works alongside other assets and any other income sources can all change your financial situation in retirement. The point at which you start, and the order in which you draw on different pools of money, matter more than many people expect.
Tax is a by-product of these decisions and not the reason for them. For standalone tax questions, your accountant is the right person to speak to.
Where to Start
If you are approaching retirement and want to understand how an account-based pension could fit your position, the starting point is a conversation about your circumstances and goals. A discovery session with Nicholas Wong is where that begins.
GENERAL ADVICE WARNING: This information is of a general nature only and neither represents nor is intended to be specific advice on any particular matter. Japhia Wealth Advisory (as an authorised representative of Madison Financial Group Pty Ltd AFSL 246679) strongly suggests that no person should act specifically on the basis of the information contained herein but should seek appropriate professional advice based upon their own personal circumstances.