Account-based pension
A super account converted into a regular income stream, with earnings tax-free in retirement phase.
When you retire and meet a condition of release, you can convert your super from accumulation into an account-based pension. The balance stays invested while you draw an income from it.
The tax treatment is the main attraction. Investment earnings in retirement phase are entirely tax-free, and for members aged 60 and over the payments themselves are generally tax-free too.
You must withdraw a minimum percentage each year, rising with age. The account lasts until the money runs out, so drawing too heavily early creates real longevity risk.
You retain control of the investment strategy inside the pension. The balance stays invested in options you choose, so returns, and therefore how long the account lasts, remain subject to markets rather than guaranteed by anyone.
The tax difference
Earnings on $800,000 in accumulation are taxed at up to 15%. The same balance in retirement phase pays no tax on earnings — potentially many thousands of dollars a year.
The bit people get wrong
The amount you can move into retirement phase is limited by your transfer balance cap. Anything above it stays in accumulation, where earnings continue to be taxed.
Common questions
How much must I withdraw each year?
A minimum percentage of the balance based on your age, starting around 4% and increasing in steps through your seventies and eighties.
Can I take lump sums as well?
Yes, in addition to the minimum pension payments, provided the balance supports it and your fund permits it.
What happens when I die?
The balance passes to a reversionary beneficiary or is paid as a death benefit, with tax depending on the components and the recipient's dependency status.