Retirement marks a phase where many of us anticipate having more time for cherished activities and loved ones.
Whether it’s spending quality moments with family, pursuing hobbies, or embarking on dream travels, a regular income source like an account-based pension (ABP) can provide stability and peace of mind.
What is an account-based pension?
An account-based pension (ABP) allows you to use a portion of your superannuation as a regular income stream while keeping the remainder invested. You may also opt for a partial pension income stream via a Transition to Retirement (TRIS)
By transferring funds from your super into an ABP, you can potentially earn tax-free returns on investments while receiving income payments.
You can initiate an ABP once you reach your preservation age, which varies depending on your birthdate, and the pension’s structure can be tailored to suit your financial needs.
What are the advantages of an account-based pension?
An ABP offers control over how your retirement funds are invested and the flexibility to decide the frequency and amount of payments (within regulatory limits).
You can access additional funds as necessary and adjust your investment and payment preferences at any time.
Income earned within the ABP is generally tax-free from age 60, even if you continue working. Self-managed super funds can also claim an income tax exemption on pension assets (ECPI).
How does an account-based pension operate?
You can transfer funds from your super to an ABP when you meet certain conditions: reaching preservation age and retiring, turning 65, or ceasing employment after age 60.
Starting an ABP involves reporting to the ATO (Transfer Balance Account Reporting) and there’s a lifetime cap of $1.7 million on the amount transferable into an ABP.
Minimum withdrawals are required annually, these are shown below and are current from 1 July, 2024 onwards until otherwise notified from the ATO.
| Age | 2023–2024 onwards |
| Under 65 | 4.0% |
| 65–74 | 5.0% |
| 75–79 | 6.0% |
| 80–84 | 7.0% |
| 85–89 | 9.0% |
| 90–94 | 11.0% |
| 95 or more | 14.0% |
Duration of an account-based pension
An ABP doesn’t guarantee lifelong income. Payments continue until the account balance is depleted or if you decide to close the account and receive the remaining balance as a lump sum.
The duration of your ABP depends on factors such as the initial transfer amount, investment returns, withdrawal amounts, and associated fees.
Any remaining funds in your ABP upon your death can be passed on to beneficiaries either as a lump sum or ongoing payments.
Seeking retirement advice?
Ensure your retirement savings are optimally managed. Our seasoned advisers and financial planners can assist in maximizing your assets, personal savings, investments, and superannuation for a secure retirement.
For personalised retirement planning guidance, contact Zeal Wealth on 0457 583 331 or via our Contact Us page HERE to connect with a financial planner.
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