An account-based Pension is a Flexible Tax- effective Retirement Income stream that represents the Income phase of superannuation.

Account-based Pensions provide flexible income payments and the choice of investment options.  The value of the pension depends upon the investment returns of the investment options selected and the amount of income withdrawn each year. As a result, there are no guarantees of how long your account – based pension will last.

How to purchase an account-based pension

Account-based pensions can only be purchased with superannuation money upon meeting a condition of release. The superannuation fund provides you with money which can be used to provide you with the regular income stream and the option of lump sum withdrawals (if allowable from the chosen product provider).

Taking an income stream from your superannuation fund generates tax benefits over the life of the pension. For persons age 60 or older, the income payments will be tax-free. For persons under age 60, a portion of the income payments will be tax free according to the amount of tax-free component, with a 15% tax rebate available to partially/wholly offset tax on the taxable portion of the income payment. Fund earnings and realised capital gains in an account-based pension fund are not taxed.


Account- based pensions provide the investor with various options. These include income level that can be varied from year to year. A minimum percentage is required to be drawn down (dependent upon your age).

The table below shows the minimum factors for account-based pensions which includes the reduced rate which will apply from 1 July 2019 to June 2021.

Age  Annual payment as % of account balance
66-64 2%
65-74 2.5%
75-79 3%
80-84 3.5%
85-89 4.5%
90-94 5.5%
95+ 7%

For more information on account-based pensions, please click here.

Provisions for dependants – on your death you can have the account-based pension balance paid to your dependants or estate. Alternatively, you can elect (at commencement) to have reversionary pension payments continue to a dependant (generally your spouse). Reversionary pensions continue to pay a surviving reversionary pensioner upon the death of the original pensioner.

Risks associated with account-based pensions

Taxation and legislative risk

Our information is based on legislative practices of the Australian Taxation Office (ATO) and other relevant government bodies as they presently exist. As with most financially related matters, there is always a legislative risk that provisions may be amended.

Investment values and income payments risk

An account-based pension may contain a mix of cash, capital stable, diversified and specialist fund. The value of units in each fund may rise and fall, in line with the value of underlying assets as determined by market conditions.

Account-based pensions do not guarantee your pension payments will last throughout your lifetime. Essentially, the longevity of your account-based pension is determined by your investment earnings, which are determined by your investment strategy, the income you draw and any lump sum withdrawals you may make. Payments will only continue while there is a balance in the account.