An account-based pension keeps your super invested during your retirement. This turns it into a regular income to help fund your retirement lifestyle.
At Aware Super we call this a retirement income account.
You can choose how much your income payments will be, when you get paid, and can make extra cash withdrawals whenever you need to.
Around 30% of the retirement income you get from super could come from investment earnings (see chart below). Best of all, investment earnings are 100% tax-free, and if you’re 60 or over, your income payments are 100% tax-free too.
So, keeping your savings invested in a retirement account is a great way to make your super last longer in retirement.
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- Based on the projection of the lifecycle of a single female member who starts from age 21 and plans to retire at age 67, which represents about 70% of our membership. The projection finishes at age 95.
- Results are approximated figures of 33% from investment earnings before retirement, 30% from investment earnings through retirement and 37% from contributions, which together make up the income in retirement paid by super.
- Results are stated in today’s dollars, deflated using Average Weekly Ordinary Time Earnings (AWOTE) at 3.5% p.a. for accumulation projection and using CPI at 2.5% p.a. for pension projection.
- Contributions are based on the averages of Aware Super members for each age.
- Investment returns for accumulation are based on the Aware Super MySuper Life Cycle option, assumed to be CPI + 4% p.a. until age 55, reducing from CPI + 4% p.a. to CPI + 2.75% p.a. between the ages 55-65 (inclusive) and CPI + 2.75% p.a. from age 65 onwards.
- Investment returns for pension is based on the Conservative Balanced option, assumed to be CPI + 3.25% p.a.
- Based on September 2024 Aged Pension rates, indexed with Average Weekly Ordinary Time Earnings (AWOTE) at 3.5% p.a.
- No admin fees and earnings tax are modelled as investment returns are assumed to be net of fees and tax.
- This example is for illustrative purposes only and is not intended to provide a forecast or guarantee on outcome. The case study is based on current regulatory requirements and laws, including tax rates, which may be subject to change. Investment return assumptions are for illustrative purposes only. Actual returns year on year may be negative and may vary materially. If investment returns/inflation are higher or lower, final balances will differ.
Case study: Meet Jane
See how Jane could increase her retirement income by keeping her savings invested in super with an account-based pension.
Meet Jane. She’s 67 years old and has retired with $300,000 in her super.
She’s deciding whether to open an account-based pension with her super fund or take the money out and put it in a bank account.
Option A: Jane invests her savings in super through her retirement account
Her savings plus the investment earnings could provide her with an income of $15,400 per year. This will last until she is 95 years old.
Option B: She puts her savings into a bank account.
In a bank account she would earn about 3% interest. Here, her savings will provide her with around $11,300 per year.
This means Jane could get $4,100 more income each year if she keeps her money invested in super.
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- Retirement incomes are rounded to the nearest $100 and are stated in today's dollars, deflated using CPI at 2.5% p.a. Based on a member aged 67 with $300,000 at the start of FY25 and planning to age 95. Retirement income is derived by targeting a constant total real level of income to exhaust their balance at age 95. Investment returns for the Conservative Balanced option are assumed to be CPI +3.25% p.a. which equals 5.75% p.a. Investment returns for the bank account are 3% p.a. No admin fees and earnings tax are modelled as investment returns are assumed to be net of fees and tax. Based on September 2024 Aged Pension rates, indexed with Average Weekly Ordinary Time Earnings (AWOTE) at 3.5% p.a.
- This example is for illustrative purposes only and is not intended to provide a forecast or guarantee on outcome.
- The case study is based on current regulatory requirements and laws, including tax rates, which may be subject to change. Investment return assumptions are for illustrative purposes only. Actual returns year on year may be negative and may vary materially. If investment returns/inflation are higher or lower, final balances will differ.
The extra income created by the investment earnings makes up around 30% of the income paid by your account-based pension each year.
Find out more about how an account-based pension works and a retirement account with Aware Super.
Where to next?
Find out more about the Government Age Pension
You may be eligible for the Government Age Pension when you to retire to help fund your life in retirement.
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