If you’d like to know what the difference is between a transition-to-retirement pension, an account-based pension, an annuity, and the government’s Age Pension, we break it down.

If you’re in or nearing retirement and have heard the term ‘pension’ being thrown around, you may have picked up that there are different types of retirement pensions available in Australia.

Below, we explain the difference between some of the more commonly used retirement pensions, including a transition-to-retirement pension, an account-based (or allocated) pension, an annuity, and the government’s Age Pension.

Transition to retirement (TTR) pension

A transition to retirement (TTR) pension enables you to access some of the super you’ve saved to date, via regular payments, even if you’re still working full-time, part-time or casually, and receiving an income from your employer or business.

To access your super this way, you must have reached your preservation age, which will be between 55 and 60, depending on when you were born. See the table below to work out what your preservation age is and note you’ll need to talk to your super fund about whether they provide TTR pension arrangements.

Your preservation age

Date of birth
Preservation age
 Before 1 July 1960 55
1 July 1960 - 30 June 1961
1 July 1961 - 30 June 1962
1 July 1962 - 30 June 1963
1 July 1963 - 30 June 1964 59
1 July 1964 and onwards 60

What are the potential advantages of a TTR pension?

  • You could work less, or you could work the same hours while sacrificing some of your salary into super, with your TTR pension supplementing all or some of the reduction in your take-home pay.
  • Up to age 60, the taxable amount of your income from a TTR pension is taxed at your personal income tax rate, less a 15% tax offset.
  • Once you turn 60, any income from your TTR pension is tax free. Note, the investment earnings are subject to the same maximum 15% tax rate that applies to super accumulation funds.
  • You can generally choose from a range of investment options, but note, returns are tied to movements in investment markets, so may go up or down

What are the potential disadvantages of a TTR pension?

  • Generally, you can only access between 4% and 10% of your super each financial year, but until 30 June 2022 you may withdraw as little as 2%. This figure was reduced to provide greater flexibility during the COVID-19 pandemic.
  • You can’t withdraw lump sums from your TTR pension, unless you meet certain conditions of release, such as retirement
  • The income you receive is based on the amount you have in your super. 

Once you reach age 65 or advise your super fund that you’ve retired permanently, your TTR pension will automatically convert to an account-based pension which may have even more advantages.

Account-based (or allocated) pension

If you’ve reached your preservation age (covered above), an account-based (or allocated) pension may allow you to draw a regular income from your super savings once you’ve permanently retired. You can also commence an account-based pension once you reach age 65 regardless of your work status or intentions.

If you’ve never had an account-based pension before, there’s currently a limit on how much of your super (or TTR pension) you can transfer into an account-based pension (more on this below).

What are the potential advantages of an account-based (or allocated) pension?

There’s no limit to how much you can withdraw from an account-based (or allocated) pension, but you’ll need to withdraw a minimum amount every year.

This amount is calculated based on your age and will be a percentage of your account balance. The table below shows you the yearly minimum withdrawal amounts for the 2021/22 financial year and what the general yearly minimum withdrawal amounts are. Note, the temporary reduction was to provide flexibility during the COVID-19 pandemic.

 Yearly minimum withdrawal 2021/22FY   General yearly minimum withdrawal
 55-64  2%  4%
65-74 2.5% 5%
75-79 3% 6%
80-84 3.5% 7%
85-89 4.5% 9%
90-94 5.5% 11%
95+ 7% 14%


  • Up to age 60, the taxable amount of your income from an account-based pension is taxed at your personal income tax rate, less a 15% tax offset.
  • Once you turn 60, any income from your account-based pension is tax free.
  • Generally, the earnings on the investments backing your pension are tax-free.
  • In addition to regular income payments, you can also choose to take additional lump sum withdrawals from time to time.
  • You can generally choose from a range of investment options, but note, returns are tied to movements in investment markets, so may go up or down.
  • Income from an account-based pension may receive beneficial Centrelink treatment.

What are the potential disadvantages of an account-based (or allocated) pension?

If you’re converting your super into an account-based pension to use as income in retirement, you’re restricted to transferring up to a maximum of $1.7 million into your pension. If you have a super balance above that, the excess will need to be left in the accumulation phase (where earnings will be taxed at the concessional rate of 15%) or taken out of super completely.

If you transfer your maximum amount into an account-based pension, you typically won’t be able to top up your pension a second time even if your balance reduces over time.

The income you receive is based on the amount you have in your super, so won’t necessarily guarantee an income for life. 


An annuity is another type of pension, which generally provides guaranteed payments over a set number of years, or for the remainder of your life, depending on whether you opt for a fixed-term or lifetime annuity.

The payments you receive from an annuity depend on factors such as the amount you put in and actuarial calculations, which look at economic and demographic factors to estimate future liabilities.

What are the potential advantages of an annuity?

  • You receive a guaranteed fixed income, regardless of movements in financial markets.
  • You can choose for your regular payments to keep pace with inflation.
  • You can typically choose to receive regular payments monthly, quarterly, half-yearly or yearly.
  • If it’s a lifetime annuity, you remove the worry of outliving your savings.
  • Any income you receive from an annuity, which you purchase using your super money, is tax-free from age 60.
  • Certain annuities may receive beneficial Centrelink treatment for both the assets and income tests.

What are the potential disadvantages of an annuity?

  • You usually can’t make lump sum withdrawals.
  • You may underestimate life expectancy with a fixed-term annuity, so money may run out.
  • You might not be able to transfer your annuity money to another pension product.
  • In the long run, an annuity might pay lower returns than a market-linked investment.
  • Depending on the annuity type, little or no benefit may be payable to your beneficiaries.

The government’s Age Pension

The Age Pension is a different type of pension altogether as it’s a government benefit paid to you, from between age 65 and 67, depending on when you were born and if you’re eligible.

The age at which you can access your super and the age at which you may be eligible for the Age Pension also most likely won’t be the same.

What age can you get the government’s Age Pension?

 Date of birth  Age Pension eligibility age
 Before 1 July 1952 65 
1 July 1952 - 31 December 1953 65 and a half
1 January 1954 - 30 June 1955 66
1 July 1955 - 31 December 1956 66 and a half
From 1 January 1957 67

What other eligibility criteria applies?

  • You must be an Australian resident and physically present in the county on the day you submit your claim.
  • You also must have lived in Australia for at least 10 years and continuously, for at least five of those years.
  • You must satisfy income and assets tests.

The value of various assets you have and any income you receive will determine whether you’re eligible and the amount of money you’ll receive under the Age Pension.

To find out more about how the income and assets tests work, what the cut offs are, and the maximum rates paid under the Age Pension, see our page - Am I eligible for the Age Pension?

Looking for more information

Working out any potential tax implications and when government benefits might be affected isn’t always straightforward. Contact your financial adviser or Services Australia to find out more.

If you plan on taking any super you might have as a lump sum, there will be other things to consider.

For more retirement planning tips, see our checklist.


Complimentary transition to retirement advice

If you’re an AMP super member, you are able to receive complimentary simple super advice from a retirement specialist. They can talk to you about how to access your super to top-up your income, reduce your working hours or save more money for retirement in a tax-effective way.

Important information

Any advice and information is provided by AWM Services Pty Ltd ABN 15 139 353 496, AFSL No. 366121 (AWM Services) and is general in nature. It hasn’t taken your financial or personal circumstances into account. Taxation issues are complex. You should seek professional advice before deciding to act on any information in this article.

It’s important to consider your particular circumstances and read the relevant Product Disclosure Statement, Target Market Determination or Terms and Conditions, available from AMP at amp.com.au, or by calling 131 267, before deciding what’s right for you.

The retirement health check is a general advice conversation only. It is provided by AWM Services Limited (AWM Services) ABN 15 139 353 496, AFS Licence No. 366121 (AWMS) to eligible members of the AMP Super Fund. AWM Services is a wholly-owned subsidiary of AMP.

You can read our Financial Services Guide online for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you. You can also ask us for a hardcopy. All information on this website is subject to change without notice. AWM Services is part of the AMP group.