Your retirement isn’t the finish line for your investments; it’s a gear change. For most Australians, the vehicle that makes this shift possible is the account-based pension (ABP). Understanding how it works is the first step to making it work harder for you
How account-based pensions work
An ABP is created when you move some or all your superannuation into a linked account that pays you a regular income. You choose the payment frequency (monthly, quarterly or annually) and, subject to meeting minimum requirements, how much you receive in each payment. Account-based pensions are generally available from age 60. Your capital stays invested, so your balance can keep growing even as you draw it down.
Minimum drawdown requirements
The government sets a minimum withdrawal each year, based on your age on 1 July, rising as you get older, starting at 4% under age 65 and increasing progressively to a maximum of 14% from age 95. Miss the minimum and the consequences are real, as the pension may be treated as ceasing for tax purposes, potentially costing the fund’s tax-exempt earnings status.1
| Age | Minimum withdrawal (as a percentage) |
| Under 65 | 4% |
| 65–74 | 5% |
| 75–79 | 6% |
| 80–84 | 7% |
| 85–89 | 9% |
| 90–94 | 11% |
| 95 and over | 14% |
There’s no maximum for a standard ABP, only transition to retirement income stream pensions are capped at 10%
Tax advantages of pension phase
This is where the strategy really pays off. Once in retirement pension phase, investment earnings are taxed at 0% unless you have $3 million and more invested in superannuation environment, and for anyone 60 or over, payments are tax-free.2
Key threshold to watch in 2026–27
The general transfer balance cap, the ceiling on how much you can move into this tax-free environment, rose from $2.0 million to $2.1 million on 1 July 2026.3
Where an adviser adds value
- Sequencing which assets fund your pension to manage longevity and market risk.
- Timing pension commencement and contributions around the $2.1 million general transfer balance cap.
- Structuring drawdowns above the minimum for recontribution or debt strategies.
- Coordinating the superannuation pension with Age Pension eligibility and Division 296 exposure for larger balances when you have $3 million or more invested in superannuation.
Getting the structure right now shapes your income for decades. Let’s talk through what it means for you.
The information contained in this article is general information only. It is not intended to be a recommendation, offer, advice or invitation to purchase, sell or otherwise deal in securities or other investments. Before making any decision in respect to a financial product, you should seek advice from an appropriately qualified professional. We believe that the information contained in this document is accurate. However, we are not specifically licensed to provide tax or legal advice and any information that may relate to you should be confirmed with your tax or legal adviser.
[1] Payments from super | Australian Taxation Office
[2] Retirement withdrawal – lump sum or income stream | Australian Taxation Office
[3] Transfer balance cap | Australian Taxation Office