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.
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:
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.
For convenient, 24-hour banking, we have one of the largest ATM networks of any Australian bank.