A retirement pension, or income stream, provides you with a regular income from your superannuation savings.
Account-based pension or income stream
Account-based pensions are the most common type of superannuation pensions. Many retirees choose an account-based pension, also known as an income stream, because it can offer flexibility and tax concessions.
So how does an account-based pension work?
- You invest some or all of your super to open a pension account
- You receive regular pension payments from your account – you can generally choose the amount, subject to minimum percentage of your account balance each year, and payment frequency to suit your needs
- You will generally have investment choice for your account and returns, either positive or negative, will apply to your account balance
- You can withdraw additional amounts from your balance if needed
- When your account balance reaches zero, no further payments or benefits apply.
Transition to retirement pension
Generally you need to be permanently retired to access your super but a transition to retirement pension, sometimes known as a pre-retirement pension, is a specific type of account that allows you to begin receiving an income from your super even if you haven’t permanently retired.
A transition to retirement pension works in the same way as an account-based pension outlined above, except that a maximum of 10% of your account balance can be taken in pension payments each year.
This type of strategy might be helpful if:
- you want to reduce your work hours or semi-retire in the lead-up to retirement and supplement your working income with a pension from your super
- you want to make extra concessional contributions to your super from your salary while receiving a pension from your super to supplement your income, sometimes known as re-contribution.