Super Strategies – convert your super into a tax-effective retirement income

Home / News / Financial advice / Super / Retirement / Super Strategies – 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 pension¹ could be a more tax-effective option. This is because:
  • no tax will be payable on earnings in the fund2
  • you can receive $52,5453 pa in tax-free income between your ‘preservation age’4 and 59 in 2020/21, and
  • when you reach age 60, the pension income payments will be completely tax-free5 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 2018/19
Age From investments held outside super From account based pension (taxed fund)
Preservation age4 to 59 $21,5956 $52,5453
60 to Age pension age7 $21,5956 Unlimited tax-free5 income payments. Also, you don’t have to include the income payments in your annual tax return
Age pension age7 and over $32,9158 (for singles) and $29,6118 (per member
of a couple)
As above
¹ There is a limit on the total amount that can be transferred to retirement phase in a person’s lifetime. This limit is $1.6 million in 2020/21 (subject to indexation).
² Assumes you are in retirement phase.
³ Takes into account low income tax offset, low and middle income tax offset and 15% pension tax offset as at 1 July 2020 and assumes no other income is received.
Preservation age is 55 for those born before 1 July 1960 and gradually increases to 60 depending on date of birth.
Assumes the pension is commenced from a taxed super fund.
Takes into account low income tax offset and low and middle income tax offset as at 1 July 2020.
Age where you become eligible for age pension, currently 66 and gradually increasing to 67.
Takes into account low income tax offset, low and middle income tax offset and seniors and pensioners tax offset as at 1 July 2020.

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 2020/21 the minimum payment is half the percentage below, in later years it will be as shown below.

Age Minimum pension payment
Under 65 4%
65-74 5%
75-79 6%
80-84 7%
85-89 9%
90-94 11%
95+ 14%

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. In 2020/21, this limit is $1.6 million.
  • 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

Source: MLC Technical – you can download a print ready Concept Card here.


Your Westlawn Financial Adviser can help you assess all the issues that need to be considered and determine whether an account based pension suits your needs and circumstances.

Contact us today:

General Advice Disclaimer
All of the material published on this website is for information purposes only and does not constitute advice. This information is of a general nature only and has been provided without taking account of your objectives, financial situation or needs. Because of this, we recommend you consider, with or without the assistance of a Financial Adviser, whether the information is appropriate in light of your particular needs and circumstances.
Dougherty Financial Services Pty Ltd ABN 70 717 487 005 (Trading as Westlwan Wealth Advice) Corporate Authorised Representative 328595 of Libertas Financial Planning Pty Ltd ABN 27 160 419 134 AFSL No. 429718. Please note that Libertas Financial Planning Pty Ltd is not responsible for the advice and services provided by Westlawn Finance Limited, Westlawn Insurance Brokers Pty Ltd, Westlawn Life Insurance Pty Ltd or Westlawn Business Services Pty Ltd.

We're here for you

8.45am to 5pm