Account Based Pension Calculator

Understanding account based pensions in Australia

What an account-based pension is

An account-based pension (sometimes called an allocated pension) turns your super into a regular income once you've retired and met a condition of release. You move some or all of your super into a pension account, and from there draw a regular income, tax-free for most people aged 60 and over, while whatever's left stays invested and keeps earning returns. Unlike the Age Pension, this is your own money rather than a government payment: when the account runs out, the income stops. That's the central feature to keep in mind, because the whole challenge of retirement income from super is making a finite pot last across an unknown lifespan, while still living well along the way.

The minimum drawdown rules

Each year you must withdraw at least a legislated minimum, set as a percentage of your account balance at 1 July (or at commencement in the first year) that steps up as you age: 4% while you're under 65, 5% from 65 to 74, 6% from 75 to 79, 7% from 80 to 84, 9% from 85 to 89, 11% from 90 to 94, and 14% at 95 and over. There is no maximum, so you can take more whenever you need it. These minimums are deliberately structured to draw the account down over your lifetime rather than preserve it as an estate, and the rising percentages mean the forced withdrawal climbs steeply in your late 80s and beyond, which can outpace what you actually need to spend.

What makes a balance last

Sustainability comes down to the gap between what you draw and what the account earns after fees and inflation. A widely cited starting point is drawing around 4% to 5% of the balance a year, since that's roughly in line with long-run balanced-fund returns and can let the capital last for decades. But that's a rule of thumb, not a guarantee. The honest answer depends on your actual investment returns, the fees your fund charges, inflation eroding the real value of each dollar, how many years you need the money to cover, and how you invest. Drawing 8% to 10% a year can empty even a large balance within 12 to 15 years, while disciplined drawing close to the minimum can stretch it well past 90.

Sequencing risk: the danger in the early years

The most underappreciated threat to a drawdown plan is sequencing risk: the danger of a sharp market fall in the first few years of retirement, when your balance is at its largest. A 20% market drop early on, combined with the income you're withdrawing, locks in losses you can never fully recover, because there's less capital left to rebound when markets recover. The same average return delivered in a different order, with good years early and bad years late, can leave you tens of thousands better off. This is why many retirees hold a cash or defensive buffer of a year or two of spending, so they can avoid selling growth assets during a downturn and let them recover.

How it works with the Age Pension

Crucially, the account-based pension and the Age Pension are designed to work together, and this is what stops most retirees running out. As your super balance falls over time, you may move from no Age Pension into a part pension and eventually toward the full rate, with the government safety net rising to fill the gap your super leaves. Your account-based pension balance counts under the Age Pension assets test and is deemed under the income test (for pensions started on or after 1 January 2015), so the two interact directly. The result is that your total retirement income usually lasts well beyond the point your super alone would, because the Age Pension automatically grows as your private savings shrink.

Reading this projection

This calculator simulates how long your balance survives at the income and return you enter, year by year, so you can see roughly when the account runs down and how sensitive that date is to your assumptions. Nudge the return up or down a couple of percent, or change the income you draw, and watch how dramatically the end date moves, that sensitivity is the real lesson. It's an indicative projection, not financial advice, and it deliberately keeps things simple: it can't model variable returns, sequencing risk, fees, tax in edge cases, or the precise Age Pension interaction. For a plan you'll actually rely on, a licensed financial adviser can model your specific drawdown, investment mix and Age Pension entitlement together, and Services Australia's Financial Information Service can explain the Centrelink side for free.