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?

  1. You invest some or all of your super to open a pension account
  2. 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
  3. You will generally have investment choice for your account and returns, either positive or negative, will apply to your account balance
  4. You can withdraw additional amounts from your balance if needed
  5. 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.



Other useful resources

    Account-based pension calculator

    Try this handy calculator to help you determine how long you expect your pension to last and ways to make it last longer using different options. (Source: ASIC MoneySmart)