Account-Based Pensions Explained: A Plain-English Guide for Australians
Last reviewed 26 May 2026 · FiftyPlus Finance
An account-based pension (sometimes called an allocated pension) is one of the most common ways Australians turn their superannuation into a regular income in retirement. Here's how they work, in plain English.
This page is general information only and not personal financial advice. Current rules, thresholds and percentages should be confirmed with the ATO and Moneysmart.
The basics
When you reach your preservation age and meet a condition of release — commonly, retirement — you can move part or all of your super into an account-based pension. The balance stays invested in your chosen options, and you draw a regular income from it.
Each year the government sets a minimum percentage you must draw, based on your age. There is no maximum (other than your balance). You can usually choose the payment frequency — monthly, quarterly or annually.
Minimum drawdown rates
Minimum drawdowns step up as you get older. As a general indication only, the standard rates start at around 4% under age 65 and increase in bands up to 14% from age 95+. Government temporary reductions have applied in the past — always confirm the current rate with the ATO or your fund.
If your balance falls, your dollar drawdown can also fall, because the minimum is a percentage. This is one reason some retirees keep a 'cash bucket' covering 1–3 years of expenses, so they don't need to sell growth assets in a downturn.
Investment options and risk
Your balance is invested in markets — typically a mix of Australian and international shares, property, infrastructure, fixed interest and cash. Most funds offer pre-mixed options (Conservative, Balanced, Growth, High Growth) and a 'choose your own' menu.
Returns are not guaranteed. The same balance invested in different options can produce very different outcomes over a long retirement. Understanding the trade-off between expected return and short-term volatility is central to choosing an option that fits your timeframe and temperament. See our notes on common retirement investing pitfalls.
Fees and costs to check
Account-based pensions usually carry an administration fee, investment fees that vary by option, and sometimes transaction or activity-based fees. The product disclosure statement (PDS) lists these. Small percentage differences compound meaningfully across 20+ years.
Lump sums, beneficiaries and estate planning
Most account-based pensions allow lump-sum withdrawals on top of regular payments, subject to fund rules. You can usually nominate beneficiaries — a binding nomination is generally the most certain way to direct your remaining balance, but it must be kept current.
Tax treatment of payments to beneficiaries depends on who they are (dependant vs non-dependant under tax law) and the components of your account. Confirm current rules with the ATO before relying on any assumption.
Age Pension interaction
Account-based pensions are generally counted under the assets test, and their balance is 'deemed' to earn income for the income test. The test that produces the lower payment is the one that applies. See the Age Pension and your investments for a plain-English overview, and confirm current thresholds with Services Australia.
If you'd like a calm written summary covering these areas in one place, you can request your free information pack.
Frequently asked questions
Is my income guaranteed?+
No. An account-based pension is invested in markets. The income it can sustain depends on returns, withdrawals and fees.
Can I take a lump sum?+
Most account-based pensions allow lump-sum withdrawals, but rules and tax treatment vary. Confirm with your fund and a licensed adviser.
Does it affect my Age Pension?+
It can. Account-based pensions are generally counted under the assets test and the deeming rules of the income test.
What is the minimum I must draw?+
The minimum is set as a percentage of your balance, increasing with age. The ATO publishes the current schedule.
Can I have more than one account-based pension?+
Yes, you can hold multiple pension accounts, though most people keep one or two for simplicity. Speak with a licensed adviser before splitting or combining accounts.
What happens to my account when I die?+
It generally passes according to your beneficiary nomination, with tax treatment depending on the recipient. Estate planning advice is recommended.
Related guides
Important — please read
The information provided on this website is general information only. It does not take into account your personal objectives, financial situation or needs. Before acting on any information, you should consider its appropriateness having regard to your own circumstances and obtain advice from a qualified, licensed financial adviser.
All investments carry risk, including the possible loss of some or all of the capital invested. Past performance is not a reliable indicator of future performance. No outcome, return, income or capital guarantee is made or implied.