Convert your super into a tax-effective retirement income

Starting an account based pension with your super when you retire could enable you to receive a tax-effective income and make your savings last longer.

How does the strategy work??

When you retire, it can be tempting to take your super as a cash lump sum. However, using your super to start an account based pension could be a more tax-effective option.

This is because:

  • no tax will be payable on earnings in the fund
  • you can receive $55,4403 pa in tax-free income between your ‘preservation age’ and under age 60 in 2022/23, and
  • when you reach age 60, the pension income payments will be completely tax-free and you don’t have to include these amounts in your annual tax return.
Maximum taxable income that can be received tax-free (pa) in 2022/23
Age From investments held outside super From account based pension (taxed fund)
Aged to 59 $21,885 $55,440  
60 to age pension age $21,885 Unlimited tax-free5 income payments. Also, you don’t have to include the income payments in your annual tax return
Age pension age and over $33,089 (for singles) and $29,784 (per member of a couple) As above

How do account based pensions work?

Account based pensions begin by transferring a lump-sum – usually from your super account – into an account based pension product.

You can select the frequency of payments you receive (minimum of once per year) and how much you wish to withdraw each year.

There are minimum amounts you must withdraw each year (see following table).

Your balance will be invested in the investment option(s) you choose and you can withdraw a lump sum at any time.

Minimum pension payments

There is a minimum amount you must withdraw from an account based pension each financial year, that depends on your age.

For 2022/23, the minimum pension payment is half of the percentages shown below and in later years, it will be as shown below.

AgeMinimum pension payment
Under 654%
95 plus14%

Tips and traps

  • To start an account based pension you need to have met a ‘condition of release’.
  • There is a limit on how much super you can transfer to an account based pension, or other ‘retirement phase’ account. Your financial adviser can help determine your transfer limit, which is between $1.6 and $1.7 million. This amount is indexed periodically.
  • Before you start an account based pension, search for any lost super you might be entitled to. Also consider making additional contributions and consolidate your super if you have more than one account. You can’t add to a pension once it’s commenced.
  • Consider whether you should claim a tax deduction (if eligible) on any personal super contributions you have made in the current or prior financial year before commencing a pension. To do this, you’ll need to complete a ‘Notice of intent to claim or vary a deduction for personal super contributions’ form either prior to or at the time of applying for a pension.

To find out more about these or other issues, speak to your financial adviser, or visit

Seeking advice

A financial planner can help you determine whether it is suitable to establish an account-based pension to meet your needs and circumstances.

Here are the questions or concerns you may be facing, and we can provide assistance with:

  • Superannuation recommendation: If you are unsure which superannuation company/account to choose, we can help you evaluate different options and provide recommendations based on your needs and goals.
  • Investment advice in super: Everyone’s super is invested. If you don’t make an investment choice then you are likely in default investment option which may not be appropriate to your situation. If you need advice on how to arrange investments for your super, we can assist you in creating an investment plan tailored to your risk tolerance and objectives.
  • Accumulating retirement savings: If you wish to accumulate more retirement savings or not sure if you will have enough balance upon retirement, we can assist you in devising savings and investment strategies to ensure your super grows as expected.
  • Retirement planning: If you want to plan for retirement, we can help you assess whether your existing assets are sufficient to support your retirement lifestyle and provide recommendations.
  • Sustainable retirement planning: Once retired, we can help you develop a sustainable retirement plan, including managing retirement expenses and adjusting investments to accommodate changes in the retirement phase.
  • Government benefits: If you want to understand how to maximise government benefits (i.e age pension), we can offer advice on structuring your personal assets in order to achieve optimal outcome.

No matter your situation, we will tailor solutions to your individual circumstances and goals to assist you in making informed decisions regarding your retirement planning.


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