An account-based pension converts your super lump sum into a regular income stream in retirement. This guide explains minimum drawdown rates, the tax treatment compared to lump sums, how the Age Pension interacts, and how long your money might last.
An account-based pension (also called an allocated pension or retirement income stream) converts your superannuation savings into a regular income. You transfer funds from your super accumulation account into a pension phase account, which then pays you a regular income — monthly, quarterly, or annually as you choose.
Unlike an annuity (which pays a fixed income for life from an insurance company), an account-based pension:
Model different drawdown rates and investment returns to see when your balance runs out.
Open Superannuation Calculator →The government sets minimum annual drawdown percentages. You must withdraw at least this much each year. There is no maximum unless you are drawing from a Transition to Retirement pension (where 10% is the maximum).
| Age | Minimum Annual Drawdown % | Example: $500,000 balance |
|---|---|---|
| Under 65 | 4% | $20,000/year minimum |
| 65-74 | 5% | $25,000/year minimum |
| 75-79 | 6% | $30,000/year minimum |
| 80-84 | 7% | $35,000/year minimum |
| 85-89 | 9% | $45,000/year minimum |
| 90-94 | 11% | $55,000/year minimum |
| 95+ | 14% | $70,000/year minimum |
The minimum is calculated on your 1 July balance each year. If you commence mid-year, the minimum is pro-rated for days remaining. You can choose to draw more than the minimum at any time.
One of the most significant tax benefits in the Australian retirement system: income received from an account-based pension from a taxed super fund is completely tax-free from age 60. This applies to all pension payments, regardless of amount, for assets in the fund that were built up from concessional (taxed) contributions.
Investment earnings on assets in pension phase are also tax-free — compared to 15% in accumulation phase. This means:
Since July 2017, there is a lifetime limit on how much super you can transfer into pension phase. The Transfer Balance Cap for 2025-26 is $1.9 million. This is the maximum amount you can hold in tax-free pension phase across all your pension accounts combined.
Any super above $1.9 million must remain in accumulation phase (taxed at 15% on earnings) rather than pension phase. For most Australians, the $1.9 million cap is not a constraint — it primarily affects those with very large super balances.
| Starting Balance | Drawdown Rate | Investment Return | Expected Duration |
|---|---|---|---|
| $500,000 | 4% ($20k/year) | 6% | 35+ years |
| $500,000 | 7% ($35k/year) | 6% | ~22 years |
| $300,000 | 5% ($15k/year) | 6% | ~30 years |
| $300,000 | 8% ($24k/year) | 5% | ~17 years |
For most retirees, an account-based pension works in combination with the Age Pension — the ABP supplements pension income until the balance is depleted or the retiree receives a higher Age Pension as assets reduce. The interaction with Centrelink's assets test means strategic drawdown timing matters.
Two retirees can experience identical average investment returns across twenty years and reach completely different outcomes. The difference is the order in which those returns arrive.
While you are accumulating super, a market fall is not a disaster. You hold the same units, you keep contributing, and you buy more units cheaply. Time repairs it.
Once you are drawing an account-based pension, the arithmetic inverts. A market fall early in retirement means you are selling units at depressed prices to fund your income payments. Those units are permanently gone. When markets recover, they recover on a smaller balance. The same fall arriving ten years later, after the balance has grown, does far less damage.
This is sequencing risk, and it is the reason a retirement strategy is not simply an accumulation strategy with withdrawals attached. Common responses include holding a cash or defensive buffer sufficient to fund a few years of payments without selling growth assets, or covering essential expenses with a guaranteed income stream. Which approach suits you is a question for a licensed financial adviser.
Legislated minimum drawdown percentages exist to ensure superannuation is used for retirement income rather than as an estate planning vehicle. They rise with age.
They are not advice about what you should withdraw. Drawing exactly the minimum may leave you living below your means; drawing well above it may exhaust the account. The right figure depends on your expenses, your other income including any Age Pension, your health, and how long you might live.
An account-based pension is not a guaranteed income for life. It pays until the balance is exhausted, and then it stops. Longevity risk — the risk of outliving your money — sits entirely with you.
For many Australians this is partially addressed by the Age Pension, which continues regardless. As your account balance falls, your assessable assets fall with it, and your Age Pension entitlement may increase. The two interact, which is why modelling super in isolation gives a misleading picture of retirement income.
Some retirees address longevity risk by allocating part of their balance to a lifetime income stream, accepting lower flexibility in exchange for income that cannot run out.
An account-based pension converts your superannuation into a flexible income stream, with earnings in retirement phase receiving concessional treatment and payments generally tax free from age 60. Its flexibility is genuine, and so is its principal limitation: it pays until the money runs out.
Sequencing risk in the early years matters more than average returns across the whole period, the minimum drawdown is a floor rather than advice, and the Age Pension interaction shapes your real income. This page is general information only and is not financial advice. Retirement drawdown decisions are difficult to reverse — speak with a licensed financial adviser before commencing a pension.
What is an account-based pension?
An account-based pension (ABP) is a retirement income stream drawn from your super balance. You transfer part or all of your super into a pension account, which then pays you regular income. The account continues to be invested, and you draw down from it over time. There is no cap on how much you can withdraw, but you must draw a minimum percentage each year based on your age.
What is the minimum drawdown rate for an account-based pension?
Minimum annual drawdown rates in 2025-26: age 60-64: 4%, age 65-74: 5%, age 75-79: 6%, age 80-84: 7%, age 85-89: 9%, age 90-94: 11%, age 95+: 14%. These are calculated on 1 July balance each year. The government halved these rates in 2020 due to COVID-19 — they have since returned to standard rates.
Is an account-based pension taxable?
From age 60, account-based pension payments from a taxed super fund are completely tax-free. Between preservation age and 59, payments are taxed at your marginal rate less a 15% tax offset. Investment earnings inside a pension account are also tax-free (not the 15% applicable in accumulation phase) — this is one of the major tax advantages of moving to pension phase.
How long will my account-based pension last?
This depends on your balance, drawdown rate, and investment returns. A $500,000 balance drawing 5% annually ($25,000/year) with 6% investment returns has an expected duration of approximately 30-35 years. Drawing the minimum and maintaining good investment returns prolongs the duration significantly. Our superannuation calculator can project different drawdown scenarios.
Illustrative. The same annual contribution started fifteen years earlier has fifteen extra years of earnings compounding on top of it.