Retirement Income
Various age-based provisions apply to when you can claim your superannuation and also to the way your superannuation can be paid to you. In addition, you can leave your money in your superannuation fund for as long as you like, regardless of your age or employment status, and subject to age based restrictions, contribute additional money to it in the future.
The age-based provisions that apply to accessing your superannuation are as follows:
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Establishing an income stream
You can use your superannuation money to establish a superannuation income stream or an annuity if you have attained Preservation Age (currently 55 if born before 01/07/60), whether you retire from the workforce or continue in paid employment.
Claiming a lump sum
The provisions that apply to accessing your superannuation as a lump sum payment vary depending on your age:
- If you have attained Preservation Age but have not yet reached 60 years of age, you can only claim a lump sum if you retire permanently from the workforce
- If you are aged 60 or over, but have not yet reached 65 years of age, you can only claim a lump sum if:
- You cease employment with a current employer after attaining age 60, or
- You permanently retire from the workforce
- Note: Where a person has reached age 60 and is in two or more employment arrangements, the cessation of one of the arrangements is the condition of release in respect to all preserved benefits accumulated up until that time.
- If you are 65 years or over, you can claim a lump sum from superannuation at any time; you do not need to retire from the workforce or cease working for a current employer.
However, it is important to note that:
- You cannot use superannuation money that you claim as a lump sum to establish a super income stream at a later date, unless you re-contribute it to superannuation, which may not be possible in some circumstances
- If you are under 60 years of age, you may pay tax on a lump sum benefit, depending on the amount you withdraw. No tax is payable on any after-tax contributions.
Immediate Annuities
An annuity is simply an investment that gives you a regular payment over a specified term. The annuity term can be for your lifetime, or for a specified number of years.
If, when you die, the amount paid to you as income from an annuity is less than the amount you invested, generally, the balance of your investment subject to an adjustment for interest and fees, can be paid to your estate.
Annuities may offer certainty whilst super income streams may offer more flexibility.
Super Income Streams
Super income stream funds, which are also referred to as Allocated Pensions or Account Based Pensions, allocate members’ money into their own investment account within the fund:
- They provide regular income for as long as there is sufficient money in the account
- While you are drawing on your superannuation money for income, your remaining balance continues to earn money from the fund’s investments
- Earnings within a super income stream account are totally tax-free
- Superannuation benefits are the only money that can be invested in a super income stream
- They must be rolled into the income stream product direct from your super account. You cannot withdraw money from superannuation as a lump sum and invest it directly in a super income stream at a later date
- Most super income stream products offer Member Investment Choice options that are usually quite similar to those that are currently available to you in your accumulation super fund
- Income is paid on a regular basis depending on your own requirements. With most super income stream providers you can opt for fortnightly, monthly, quarterly, half yearly or annually – which ever payment frequency is most convenient for you
- Your income stream is paid from your individual account. Therefore, your account balance will depend on three things:
- The amount in your account when you establish your income stream
- The net earnings on the account (positive or negative)
- The amount you take as income each year
- If there is money remaining in your account when you die, the pension or your account balance can be paid to your spouse, other nominated beneficiaries or to your estate. There is no loss of capital when you die.
Age pension
The potential for income streams to diminish over time means that it is extremely important to manage them effectively, and is therefore important for most people to consider how their investment allocation and income stream products can interact with the Age Pension when they are planning for their retirement.
Note: We strongly recommend that you consult with an Adviser to organise your finances as effectively as possible to combine your super, and any other savings and investments, with other retirement benefits that may be available to someone in your particular circumstances.
