Account-based pensions, also known as allocated pensions, let you create a regular income stream from your super savings when you retire. They’re flexible and tax-effective, so you get to decide how much you’d like to be paid, and how often. This means you can structure your pension payments to suit your personal retirement goals, and to complement your other income streams. For many Australians, they’re an effective way to smoothly transition into a desirable retirement.

How do account-based pensions work?


Account-based pensions work by enabling you to receive regular payments from your super savings during retirement.  


The main appeal of account-based pensions is in their flexibility, and the tax benefits – there’s no tax payable on your investment earnings. The payments are also tax-free after the age of 60.  


You can customise your account-based pension to suit how much you’d like to be paid, and how often. You can choose a fortnightly, monthly, quarterly, half-yearly, or annual payment, as it works for you.   


You can also choose how you’d like your super invested. And since your money stays invested, it will continue to generate investment returns.  


Note that there’s a minimum amount you must be paid each financial year from your account-based pension, based on your age. This is called a “minimum drawdown rate”. See the section below for more information.  


Generally, you can set up an account-based pension when you permanently retire and reach your preservation age, which is based on the year you were born. Use the chart below to learn about the preservation age.

What is my preservation age?

Your birthday
Preservation age
Your birthday

Before 1/7/1960

Preservation age


Your birthday

1/7/1960 to 30/6/1961

Preservation age


Your birthday

1/7/1961 to 30/6/1962

Preservation age


Your birthday

1/7/1962 to 30/6/1963

Preservation age


Your birthday

1/7/1963 to 30/6/1964

Preservation age


Your birthday

After 30/6/1964

Preservation age


If you want to set up a similar style of super income stream before you fully retire, you can set up a pre-retirement pension, also known as transition to retirement (TTR) pension. TTR pensions allow you to work fewer hours and keep your income topped up with your super savings as you approach retirement. You can start a TTR pension once you’ve reached your preservation age. However, you’ll typically pay more tax on TTR pensions, and face more restrictions, compared to account-based pensions.  

Account-based pension minimum


There’s a minimum amount you must withdraw from your account-based pension each year. This figure is calculated by the government and is based on your age and your account balance. Have a look at the chart below to understand what your minimum payment might look like. 


The minimum drawdown rate for each age group is shown in the table below.  

Standard minimum age-based percentage 

Under 65  

Standard minimum age-based percentage 



65 – 74 

Standard minimum age-based percentage 



75 – 79 

Standard minimum age-based percentage 



80 – 84

Standard minimum age-based percentage 



85 – 89  

Standard minimum age-based percentage 



90 – 94  

Standard minimum age-based percentage 




Standard minimum age-based percentage 


Note: The table above shows the standard minimum percentages for each financial year.  Age is measured on the commencement day of the pension and every following 1 July.  


The government halved the minimums for the following financial years:  2008/09, 2009/10, 2010/11, 2019/20, 2020/21, 2021/22 and 2022/23. The government reduced the minimums by a quarter in 2011/12 and 2012/13.  

Notably, your account-based pension does not prevent you from withdrawing additional lump-sums from your account if needed. It enables routine and regularity for those who like a predictable and consistent payment schedule, with the flexibility of extra payments.   


Note that the minimum drawdown rate, changed as of 1 July 2023. Learn more about the minimum pension payment here.  


There's also a lifetime limit on how much superannuation you can transfer into a tax-free retirement account like an account-based pension. This is called the transfer balance cap. As of 1 July 2023, the general transfer balance cap increased to $1.9 million. This amount is reviewed each financial year.

What is the advantage of an account-based (allocated) pension?

  • Tax benefits: If you’re 60 or over, you won’t pay tax on your pension payments or your investment earnings. 
  • Easy to access: Payments are made straight into your bank account. You can withdraw from your account at any time, and you can withdraw as much as you like until your account balance is exhausted. 
  • Flexibility: Choose the payment structure that suits you. This includes how much you’re paid, and how often. Note there’s a minimum you must be paid each year based on your age.  
  • Earnings on your investment: As your super stays invested, it can keep growing and might last you a little longer.  
  • Structure and certainty: Enjoy regular payments that you can plan around, as though you were earning income from your job.  
  • Supplement the Age Pension: Boost your Age Pension income with additional income. 
  • Plan for the future: Your nominated beneficiary/ies will receive whatever funds remain in your account when you pass away.   

What is the difference between an allocated pension and an account-based pension? 


There’s no difference, they’re effectively the same thing.  


Allocated pensions were introduced before account-based pensions, but the term “allocated pension” is still widely used despite some considering it outdated. 


The same rules apply to both.  

Account-based pension disadvantages


  • Minimum payment: You must withdraw the minimum amount each year, based on your age and account balance.  
  • Affects Age Pension eligibility: Services Australia factors your account-based pension into your Age Pension income and assets test.  
  • Outliving your super savings: Your super savings might not last as long as you do.  
  • Investment risk: There’s no guarantee your investment will get positive returns.  

Choosing the best CFS fund for your account-based or allocated pension  


FirstChoice Wholesale Pension is designed for members and investors who are approaching retirement and want to convert their super benefits into an account-based pension. Learn more here.  

Is there any difference between an account-based pension and a term allocated pension?


Term-allocated pensions are less flexible than account-based pensions, but they work in the same way by letting you access your super as a retirement income stream. 


The main difference is that term-allocated pensions pay over a fixed term – unlike account-based pensions which roll on indefinitely provided there’s still money in your super account. 


This means that while your account-based pension can be turned into a lump sum at any time, your term-allocated pension locks you into a fixed payment schedule.   


One of the main benefits of term-allocated pensions is that only half of their capital value is included in the Services Australia assets test, meaning it might be easier to access payments like the Age Pension. 


The ability to commence a term allocated pension from existing super savings stopped in March 2007. A term allocated pension can only be commenced today with the proceeds from the commutation of an existing complying income stream. 

What happens to my account-based pension after I pass away?


Your beneficiary, or beneficiaries, will take over whatever funds you have remaining when you pass away.  


Your pension can continue to be paid to your spouse, or they can withdraw the balance as a tax-free lump sum. It can also be paid to your other dependants.  


If your beneficiary is a child, subject to eligibility, they’ll get pension payments until they’re 25, and then receive the remainder as a lump sum.  


Learn more about nominating a beneficiary for your super or account-based pension.

Getting started.  


If you’d like to set yourself up with an account-based pension, you can sign up for FirstChoice Wholesale Pension here.  


If you have questions about our account-based pension, call us on 13 13 36.   


If you’re still not sure whether this is the right path for you, consider speaking with a financial adviser. They’ll review your personal situation and help you find the solution which best suits your life-stage, financial goals, and risk tolerance. If you don’t have an adviser, you can use our find an adviser service to locate one near you.

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Avanteos Investments Limited ABN 20 096 259 979, AFSL 245531 (AIL) is the trustee of the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557 and issuer of FirstChoice range of super and pension products. Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (CFSIL) is the responsible entity and issuer of products made available under FirstChoice Investments and FirstChoice Wholesale Investments.


Information on this webpage is provided by AIL and CFSIL. It may include general advice but does not consider your individual objectives, financial situation, needs or tax circumstances. You can find the target market determinations (TMD) for our financial products at which include a description of who a financial product might suit. You should read the relevant Product Disclosure Statement (PDS) and Financial Services Guide (FSG) carefully, assess whether the information is appropriate for you, and consider talking to a financial adviser before making an investment decision. You can get the PDS and FSG at or by calling us on 13 13 36.