Allocated pensions

Allocated pensions are a popular way to receive an income after retirement. There can be significant tax benefits to retirees who roll their superannuation savings into this type of product.

An allocated (or account-based) pension provides a regular income in your retirement. Income payments are funded from your superannuation lump sum and the investment earnings this generates. A fund manager maintains your pension account and the balance fluctuates in line with market movements, investment returns, fees, deductions for pension payments and other withdrawals.

What are the benefits?

You can choose the amount of income you receive each year. However, there is a minimum is set by the government which increases as you get older. These income payments will continue until your account balance is used up or you withdraw your savings.

It’s generally far more tax-effective to convert your super into an allocated pension than it is to cash it out. This is because you receive a 15% tax offset on any taxable income if you are aged between 55 and under 60 (conditions apply if you are under 55). Payments are tax free if you are over 60. In addition, any investment earnings are tax free¹.

With an allocated pension, you can:

• Choose from a wide choice of investments
• Easily access your capital (except if commenced as a pre-retirement pension)
• Make lump sum withdrawals whenever you want
• Receive social security concessions under some circumstances
• Pass on the balance of your account to your beneficiaries when you die

It’s wise to seek professional financial advice before making any decision about funding your retirement, and we can help. If you’d like more information about retirement planning, you can book an appointment online to organise a complimentary, no-obligation consultation with a Commonwealth Financial Planner and start planning for your ideal retirement today.

• Important information
  1. Correct as at 1/02/2011.
  
  The information contained on this web page is of a factual nature only and is not intended to constitute financial product advice. It has been prepared by Commonwealth Financial Planning Limited without considering your individual objectives, financial situation or needs. You should consider its appropriateness in light of your circumstances and consider seeking professional advice relevant to your individual needs before making a decision based on this information. Commonwealth Financial Planners are Representatives or Authorised Representatives of Commonwealth Financial Planning Limited ABN 65 003 900 169, AFSL 231139, a wholly owned but non-guaranteed subsidiary of Commonwealth Bank of Australia ABN 48 123 123 124.