Your quick guide to retirement pensions

Not sure about the difference between a TTR, ABP and age pension? Here 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 there are different types of retirement pensions available in Australia.

Here we explain the difference between some of the more common types, including a transition-to-retirement pension, an account-based (or allocated) pension, and the government’s age pension.

* Based on the balance in your pension account (and not including the balance of any super account you may hold) at 1 July each year. In the first year, this is based on your starting balance. In the first year the minimum annual payment amount is pro-rated, but your maximum income is not.

Transition to retirement (TTR) pension

A 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 once you turn 60.

• 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.
• Any income from your TTR pension is tax free but investment earnings are taxed at a maximum of 15%.  
• You can generally choose from a range of investment options but returns are tied to movements in investment markets, so may go up or down. 

• The income you receive is based on the amount you have in your TTR account. 

Once you reach age 65, or advise your super fund that you’ve retired permanently before turning 65 (or you’re permanently incapacitated or have a terminal medical condition), any TTR pension you have will automatically convert to an account-based pension which may have even more advantages.

How to calculate your annual pension income from a TTR

Here’s an example of how the maximum and minimum TTR pension payments are calculated.
John is 60 years old and invests $200,000 in a TTR pension on 1 July. How much pension can he receive?

Full financial year:

If John had started his pension on 1 January, the minimum annual TTR income amount would be reduced to $2,000 as he’s only receiving pension payments for half the financial year. The maximum income isn’t reduced where the pension is being paid for part of a financial year and would still be $10,000.

Account-based (or allocated) pension

If you’ve turned 60, an account-based (or allocated) pension (ABP) may allow you to draw a regular income from your super savings once you’ve permanently retired. You can also commence an ABP once you turn 65 regardless of your work status or intentions.

There’s no limit to how much you can withdraw from an ABP, but you’ll need to withdraw a minimum amount every year. This is 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 2024/25 financial year.

In an ABP you can generally choose from a range of investment options but returns are tied to movements in investment markets, so may go up or down.

The value of your pension and the pension payments your receive may impact the Centrelink treatment of your social security benefits.

How much you can transfer into your pension

If you’re commencing a pension or other retirement income stream with your super, you’re restricted to transferring up to your personal transfer balance cap amount. If you’re starting your first pension now, this amount is $1.9 million, unless you’ve made personal injury contributions into your super.

If this isn’t the first time you have commenced a pension (other than a TTR pension), then you’ll be limited by your remaining personal transfer balance cap, which may be higher or lower than $1.9 million. You can find out your remaining personal transfer balance cap by logging on to MyGov and connecting through to the ATO Online portal. If you have a super balance above that amount, the excess will need to be left in the super environment (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 ABP, 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 pension account, so won’t necessarily guarantee an income for life.

How to set up a TTR or pension account

You can set up a TTR or pension account through My AMP or by completing this form.

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 age 67 if you’re eligible.

Generally, you need to:

• be at least 67 years of age
• be an Australian resident and present in the country on the day you submit your claim
• have lived in Australia for at least 10 years and continuously for at least 5 of those years
• satisfy income and assets tests.

The value of your assets and income will determine whether you’re eligible for the age pension and the amount you’ll receive.

Looking for more information?

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