• Account based pensions

  • A flexible way of accessing and managing your super savings as a tax-effective income stream in retirement

    What is an account based pension?

    An account based pension (also known as an allocated pension) is commenced by transferring the money you've accumulated in super into your new pension account and provides you with a regular income stream.

    Unlike super, where your money is unable to be accessed until you retire, when you invest in an account based pension you can gain additional tax benefits. 

    If you've made the decision to fully retire from the workforce and reached your preservation age (see section below) – or satisfied another condition of release – you can start an Australian Catholic Superannuation account based pension.

    If you've reached your preservation age, but not yet retired from work, you can take out another type of account based pension called a transition to retirement pension.

    We offer you a choice of two different account based pensions – RetireChoice and RetireSmart. The main difference between the two is in whether you want to make your own investment-related decisions or if you prefer an investment strategy that has been pre-mixed for you.

    Both of these products can be used:

    • If you're already retired or are transitioning to retirement
    • As the major source of your retirement income
    • As a supplement to your Centrelink Age Pension, or
    • As a component of a multi-faceted retirement income portfolio that includes income such as rent from investment properties.
  • Supplementing your income in retirement

    Many people will find that their income in retirement will comprise both a pension from their super savings as well as income from the part Age Pension. According to 2014/15 statistics, 75% of all retirees currently receive some level of Centrelink Age Pension income*. 

    Centrelink takes into account your age and residence when determining your eligibility for the Age Pension. In addition to these requirements, two means tests are also applied.

      *Department of Human Services

  • Key features

    The following key features apply to our RetireChoice and RetireSmart account based pensions.

    Investments

    Choose the investment mix that best meets your retirement objectives. Different investment mixes will provide different levels of income and capital growth. You can also change your investment mix at any time. (Not available to RetireSmart members as this pension has a pre-set investment strategy.)

    Pension income

    Nominate your annual income (as a percentage of your account balance), subject to an age-based minimum. Maximum annual pension limits also apply to transition to retirement pensions.

    You can also choose the option/s from which your income is paid. (Not available to RetireSmart pension members).

    Flexibility

    Make lump sum withdrawals at any time. The minimum amount for each withdrawal is $5,000. (Lump sum withdrawals not available to members with transition to retirement pensions.)

    Payment frequency

    Choose to receive weekly, fortnightly, monthly, quarterly, twice-yearly or yearly pension payments.

    Minimum investment

     $25,000 (RetireChoice) | $100,000 (RetireSmart)

    Maximum investment

    $1.6 million (2017/18 financial year) for account based pensions. Please refer to the Transfer Balance Cap. There is no maximum investment for the transition to retirement pension.

    Estate
    planning

    Death benefits can be paid to your spouse as continued pension payments, or as a lump sum to your dependants or estate.

    Learn more about our RetireSmart and RetireChoice pension products.

  • What is your preservation age?

    Your preservation age is the age at which you can access your super if you're retired (or have started a transition to a retirement pension). It's not the same for everyone as it depends on when you were born. Preservation age should not be mistaken with qualifying for the Centrelink Age Pension. Use the table below to work out your superannuation preservation age.

    If your date of birth is... Your preservation age is...
    Before 1 July 1960 55
    1 July 1960 – 30 June 1961 56
    1 July 1961 – 30 June 1962 57
    1 July 1962 – 30 June 1963 58
    1 July 1963 – 30 June 1964 59
    On 1 July 1964 or after 60

    For detailed information on when you can access your superannuation, download the Conditions of release pension fact sheet (PDF).

  • How do account-based pensions work?

    How can you set-up a pension account?

    You start with money that has already been contributed, saved or rolled over into your super account and transfer into a pension account. It's then invested and earnings are allocated to your account. Depending on the product you choose, you may be able to decide how your money is invested. This is very similar to a super account except you can’t make any more contributions to an existing pension account once it is opened. (You can of course open an additional pension account). Within certain limits, you can also decide on the amount of pension income you wish to receive each year.

    Are there limits to the amount you can invest in an account based pension?

    From 1 July 2017, a cap of $1.6 million (2017/18 financial year) applies to how much superannuation you can transfer into retirement phase accounts over your lifetime. Retirement phase accounts include account based pensions, income streams, pensions and annuities. (Transition to retirement pension accounts are not included in the lifetime cap.)

    The lifetime cap is referred to as the transfer balance cap.

    What is the transfer balance cap?

    The transfer balance cap is the total amount that can be transferred into retirement phase accounts. The cap includes the total amount that you have in all your retirement phase accounts, that is, not just with Australian Catholic Superannuation.

    For the 2017/18 financial year the transfer balance cap is $1.6 million.

    The transfer balance cap will be indexed in line with the CPI and will be increased by increments of $100,000. The amount of indexation that is applied to an individual’s transfer balance cap will be different for each person e.g. if you have reached or exceeded the transfer balance cap on 1 July 2017 indexation will not be applied to your account or if you have not fully utilised the cap, the indexation will apply to the proportion of the unused transfer balance cap.

    What is counted towards the transfer balance cap?

    Each person will have their own transfer balance cap and the assessment of the cap will consist of debits and credits.

    Credits include:

    • For existing members, the value of all your retirement phase accounts as at 30 June 2017
    • The value of any new pensions or annuities that you may commence from 1 July 2017
    • Reversionary pensions you currently receive or commence to receive in the future 
    • The portion of a pension income stream you may have received as part of a Family Court settlement.

    Debits include:

    • Lump sums withdrawals from your income stream
    • Adjustments to meet Family Law settlements
    • Contributions made under a structured settlement.

    The cap does not apply to any subsequent growth or losses, that is, if you start a pension with $1.6 million and the value of that pension grows to $1.65 million, you will not exceed your cap. In addition pension payments do not reduce your transfer balance cap.

    What happens if you exceed the cap?

    If you exceed your transfer balance cap you will be required to:

    • Remove the amount that has exceeded your transfer balance cap plus excess transfer balance cap earnings from your retirement income stream pension(s). The amount can be rolled back into a superannuation account or withdrawn as a lump sum.
    • Pay excess transfer balance tax.

    The ATO will calculate the excess amount to be withdrawn and the transfer balance earnings and will issue a determination. Once the amount has been withdrawn, the ATO will issue an assessment for the amount of excess transfer balance tax.

    For further information on the transfer balance cap please refer to the ATO.

    How much pension income will you receive?

    Each financial year, you must take at least the minimum annual pension payment, as determined by government legislation. This is calculated as a percentage of your account balance when you start your pension (1 July in later years) and depends on your age, as shown in the table below.

    If your age is... Your minimum annual pension payment
    (% of your pension account balance) is...
    Under 65 4%
    65 – 74 5%
    75 – 79 6%
    80 – 84 7%
    85 – 89 9%
    90 – 94 11%
    95 or over 14%

    There is no annual maximum payment limit for RetireChoice. However, there is a maximum limit of 20% of your account balance for RetireSmart. In both cases, if you have a transition to retirement pension, there is a payment limit of 10% up to age 65 (or when you retire).

    When will you receive pension payments?

    You can choose to have your pension paid weekly, fortnightly, monthly, quarterly, half-yearly or annually.

    Can you change your pension payments?

    You can change the amount and frequency of your pension payments during the year as long as you meet the legislated minimum withdrawal and the legislated maximum in the case of transition to retirement, or the RetireSmart maximum.

    How is your pension account taxed?

    Account based pensions receive favourable tax treatment. Learn more about tax and account based pensions.

    Your account based pension may affect your Centrelink eligibility as it will be included in both the assets test and the income test. You should contact Centrelink or your financial adviser for further details.

    How long will your pension income last?

    Regular pension payments, and in some cases lump sums, are deducted from your account. Your pension will last until your account balance reduces to zero. The length of time this takes will depend on the size of your initial investment, investment earnings and how much you withdraw. Use our super projection calculator or seek advice from a licensed financial planner who can help you estimate how long your pension is likely to last.

    If you have money in your account based pension when you die:

    • Your eligible dependant can receive a reversionary pension
    • You can leave a lump sum to your dependants.

    Can you cash in your pension?

    Unless you have a transition to retirement pension, you can cash in all or part of your account based pension at any time. The minimum lump sum withdrawal amount is $5,000. There's no maximum partial withdrawal.

    Before cashing in your full pension, you must have received at least the pro rata minimum pension payment for the financial year. You can only cash in a transition to retirement pension in limited circumstances.

    You can also transfer your pension back to a superannuation account at any time.

    Download the Transition to retirement account based pension fact sheet (PDF) for further details on the circumstances in which you can make lump sum withdrawals.

  • What does it cost to start an account-based pension?

    There is no upfront cost to start either a RetireChoice or a RetireSmart account based pension with Australian Catholic Superannuation, apart from the amount of your minimum initial investment. However, some ongoing fees and costs to administer your pension account and manage your investments will apply. For more information and examples, download the Retirement Product Disclosure Statement (PDF).

  • Are there any risks investing in an account based pension?

    Superannuation is not like a bank account – investment returns can't be predicted and they're not guaranteed.

    Depending on your selected investment strategy, your money is normally invested in assets such as shares, bonds, infrastructure and property, which can go up or down in value depending on how investment markets perform. You can also invest your money in other options, including our Cash and Term Deposits option, which allows you to retain the advantages of remaining in the superannuation system. Unless you invest in cash, it is likely that in some years you will experience a negative investment return.

    As a rule, there is a trade-off between risk and return. Investments with the potential for higher long-term returns (such as shares) are subject to higher risk. Returns are likely to fluctuate more from year to year and negative returns are more likely.

    To learn more about the relationship between risk and return for different investment options for super and a RetireChoice pension refer to this chart.

    Lower risk investments (such as cash and term deposits) are less likely to experience negative returns. The long-term returns are likely to be lower and may not keep up with inflation.

    Some investments (such as property) are illiquid and you may not be able to redeem your investment quickly.

    Legislative changes may also impact on the value of your investment or alter your ability to access your superannuation.

    Other risks include operational risks, such as fraud, negligence or an external service provider may fail to provide an adequate level of service.

  • Need more information?

    For more detail on Australian Catholic Superannuation's account based pensions, including transition to retirement pensions, download and read the Retirement Product Disclosure Statement (PDF).

    If you have questions about our pension products or require specific advice on your own situation, you could benefit from making an appointment to meet with a financial planner at Australian Catholic Superannuation. They'll be able to help you decide if an account based pension is best suited to your financial needs. You can call us on 1300 658 776 for more information or to make an appointment for an initial obligation-free discussion.

    Learn more about our financial advice services.

    The Australian Catholic Superannuation financial planning service is offered through an arrangement with Industry Fund Services Limited (IFS) (Australian Financial Services Licence 232514).