SUPERANNUATION

Account Based Pensions (Formerly Allocated Pensions)

One of the most flexible retirement income products included in the superannuation system is the allocated or account based pension.  New pensions are called account based pensions.

Account based pensions can be accessed where a person has attained preservation age and permanently retired from the workforce, is over age 60 and has ceased employment or changes employers, or has attained age 65.  Unrestricted non-preserved components of superannuation benefits can be rolled over to an account based pension account and commenced at any time.

A minimum amount of pension must be paid each financial year.  The minimum amount of pension is set by the Government and is specified in SIS.  The minimum amount of pension to be paid in a financial year is a percentage of the account balance supporting the account based pension at the commencement of the financial year or for a new account based pension, the date of commencement. 

There is no maximum pension amount.

The following table sets out the minimum amount of pension to be paid in each financial year.

Pension payments for recipients age 60 and over are tax-free.  Those under age 60 are taxed in the normal way on the taxable component of the pension.  The tax-free component is tax-free.  However, there is a superannuation tax offset of 15% on the taxable component of the pension for those aged between preservation age and age 59 inclusive.

All or part of the pension can be commuted to a lump sum at any time.  The lump sum is tax-free for those aged 60 and over. 

Most superannuation providers provide an income stream product that meets the SIS definition of an account based pension.