• Using your superannuation in retirement

  • How you use your superannuation in retirement will depend on a number of factors, including how much super you have and whether you have any investments outside of super.

    It is worthwhile taking the time to work through the options, as making the right decision could:

    If you need advice for your particular circumstances, Australian Catholic Superannuation offers financial planning services that can help you.

  • Your superannuation options

    The options for using your super in retirement include:

    • Leaving your money in your super account and withdrawing cash as you need it
    • Withdrawing your money from super and banking or investing it
    • Converting your super into an income stream called an account based pension.

    Withdrawing cash from your super as needed

    This option does provide you with some flexibility.

    Generally, you won’t pay tax on your withdrawals if you are aged 60 or more. However, your investment earnings will be taxed at 15% within the super fund - the return you receive is after-tax.

    Also bear in mind that, depending on your chosen investment option within super, to obtain cash you may need to sell your investment at an adverse time.

    Withdrawing money from super and banking or investing it

    Depending on your income, you may have to pay tax on investment earnings and/or capital gains tax on investments outside super.

    So when comparing this option with leaving the money in super; remember to compare the after-tax returns.

    Converting your super into an account based pension

    Investment earnings are tax-free for account based pensions and investment earnings for transition to retirement pensions are taxed up to 15%. If you are aged 60 or more, your payments are generally tax-free.

  • How account based pensions work

    • An account based (or allocated) pension is an income stream paid from your super fund.

      You start by transferring your existing superannuation (to which you may have already added cash from a bank account or from the sale of investments) into a new account based pension. From 1 July 2017, there is a limit on the amount that can be transferred to an account based pension. The limit is called the transfer balance cap ($1.6m for 2017/18) and only applies to standard account based pensions, not transition to retirement pensions. This is very similar to a super account except you can’t make any more contributions once the pension account is opened. You can decide how your money is invested, and any investment earnings are applied to your account.

      Within certain limits, you can also decide on the amount of pension income you wish to receive each year.

      Account based pensions are not guaranteed. How long your pension will last depends on the amount you start with, how much your investment earns and how much pension you take each year.

      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.

      There are two types of account based pensions.

      1. The basic account based pension is available if you are fully retired or have reached 65 years of age and there is no taxation on the investment earnings.
      2. Otherwise, from age 57 years and even if you're still working, you can receive a slightly less-flexible account based pension (with some limits on the withdrawals) called a transition to retirement pension. The investment earnings are taxed at up to 15% for a transition to retirement pension.
  • Account based pension facts

    • To start an account based pension you must be at least 57 years of age, or permanently incapacitated.

      From 1 July 2017, there is a limit on the amount that can be transferred to an account based pension. The limit is called the transfer balance cap and only applies to standard account based pensions, not transition to retirement pensions.

      If you are not fully retired and you are under the age of 65, you can take a transition to retirement pension. Once you retire or reach 65 years of age, your transition to retirement pension will convert to a standard account based pension i.e. any limits on withdrawals will cease and the investment earnings will be tax free.

      Account based pensions and your super

      • You can only use superannuation money to start an account based pension. If you want to use non-super money to supplement your super savings e.g. by also transferring money from a bank account, you must first contribute it into your super account.
      • A transfer balance cap of $1.6 million applies for the 2017/2018 financial year.
      • You can convert your pension back to super at any time (e.g. if you decide to return to work).
      • Once you start an account based pension, you can’t add to it. However, you can convert your pension back to super, add any new money, and then transfer the total to a new pension. Or you can set up a second pension. The total amount that you can invest into all your pension accounts (not including Transition to Retirement pensions) will be subject to the transfer balance cap.

      Minimum pension payments

      You must take at least a minimum pension every year - currently 4% of your account balance is required, if you are under 65 years of age.

      The minimum percentage you must take increases as you get older as shown in the following table.

      Your age Minimum % pension payment
      Under 65 4%
      65-74  5%
      75-79 6%
      80-84 7%
      85-89 9%
      90-94 11%
      95 or over 14%

      Maximum pension payments

      The maximum amount you can withdraw from your pension account each year depends on a combination of your pension eligibility status and your choice of the Fund’s offer of two pension arrangements:

      Pension type Account based pension (e.g. you have fully retired) Transition to retirement account based pension (e.g. you are still working and under age 65)
      RetireChoice No annual withdrawal limit 10% of account balance each year
      RetireSmart 20% of account balance each year 10% of account balance each year


      Making withdrawals

      • If you have a standard account based pension, you can withdraw a lump sum at any time.
      • If you have a transition to retirement pension, you can’t withdraw any lump sums.
  • Transitioning to retirement

    There are three main ways you can use an account based pension to transition to retirement:

    1. You can access up to 10% of your account balance each year and use the proceeds for any worthwhile purpose, such as to pay down your mortgage or credit card debts, potentially improving your financial position ahead of retirement.
    2. You can reduce your hours of work and take out an account based pension to make up for the reduction in income.
    3. You can continue to work full-time, take out an account based pension, and salary sacrifice some of your income from work back into your superannuation account. This strategy can potentially save you tax, particularly if you are 60 years of age, or more.

    This information does not take your financial circumstances into account. As these strategies are not suitable for everyone, we recommend that you seek advice from a reputable financial planner before making any decision.

    Call us on 1300 658 776 to make an appointment for either of our two advice services – over-the-phone, or face-to-face – both of which take your particular circumstances into account and result in you receiving a written Statement of Advice.