Account-Based Pensions: How Super Actually Pays You in Retirement

Disclosure: The views expressed in this post are the opinions of the author and are intended for general informational and educational purposes only. They do not constitute financial advice. Full disclaimer →

The moment super stops being a savings account and starts being an income stream is a distinct legal event — and it changes the tax rate on fund earnings from 15% to 0%.

Understanding this mechanism matters for anyone modelling a FIRE date that includes a superannuation-funded phase of retirement, not just the bridge years before it.

What Actually Changes at Retirement Phase

Once a full condition of release is met — genuine retirement, or turning 65 — a super balance can be converted from accumulation phase into an account-based pension. Fund earnings inside a retirement-phase pension are taxed at 0%, compared with 15% in accumulation phase, which is the single largest structural tax advantage in the entire super system.

The Minimum Drawdown Rules

Once in an account-based pension, a minimum percentage of the balance must be withdrawn each financial year, set by age: 4% under 65, 5% from 65–74, 6% from 75–79, 7% from 80–84, 9% from 85–89, 11% from 90–94, and 14% from 95 onward. There’s no legislated maximum — the account holder can draw more, just not less, and the percentage is recalculated annually against the 1 July balance.

The Transfer Balance Cap Ceiling

Not all of a super balance can necessarily move into the 0%-tax retirement phase — the general transfer balance cap limits how much can be transferred into account-based pensions ($2.1 million from 2026–27). Amounts above that ceiling can stay in accumulation phase (still taxed at 15%) or be withdrawn, but can’t sit inside the 0%-tax pension environment.

Moneysmart’s overview of account-based pensions covers the assets-test and income-test interactions with the Age Pension, which sit outside the tax mechanics covered here but matter for anyone modelling total retirement income rather than just the super component. Account-based pensions remain the default retirement-income vehicle for the large majority of Australians who move out of accumulation phase.

Frequently Asked Questions

What’s the difference between a TRIS and a standard account-based pension?

A Transition to Retirement pension is available before a full condition of release is met and stays taxed at 15% on earnings; a standard account-based pension only starts once retirement is genuine (or age 65) and earnings drop to 0%.

Is there a minimum age to start an account-based pension?

Access requires meeting a condition of release — reaching preservation age and genuinely retiring, or turning 65 regardless of work status.

Do I have to withdraw the minimum amount even if I don’t need the income?

Yes — the minimum drawdown is a legislated requirement of maintaining the pension, not an optional guideline, though excess withdrawals can often be recontributed to super subject to normal contribution rules.

Account-based pension rules, minimum drawdown rates, and the transfer balance cap are set by legislation and subject to change — figures in this post reflect rules confirmed current as of August 2026. This content is specific to Australian superannuation law.

Written by The Founder — currently employed full-time and building toward $20,000/month in passive income.

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