What is an Account-Based Pension?
You have been busy trying to save for your future. Your super savings are growing steadily because you have invested them wisely. However, you may be wondering about getting those benefits when you are no longer working.
Many people put their money into an account-based pension in order to access it. So what is that?
An account-based pension (also known as an allocated pension) is an account which allows you to get money regularly from your super fund when you have reached your preservation age and finished working, which is between fifty-five and sixty years old, depending on when you were born. Your super is transferred to an account-based pension account, allowing you to continue to receive a regular income after you retire.
There is a limit on how much money you can transfer into a superannuation account-based pension. You can’t transfer more than 1.6 million dollars into your pension account. If you have more than that, the rest of the money can stay in your super account or be taken out completely. However, it is important to look at the tax implications of doing it this way.
Once you decide to transfer your money, you are able to set your account-based pension up several ways. You can set up regular payments or you can withdraw money as you need to in lump sums. There is no limit on how much money you can get out. However, there is a minimum, which depends on your age.
It is important to understand that your pension account balance will fluctuate over time for two main reasons:
- Your account-based pension continues to be invested in your chosen investment option – so the returns on your pension will depend on how the investment markets perform.
- Your regular payments or lump-sum withdrawals come directly from your pension account balance. For most people, the overall effect of this is that the money in their pension account will gradually decrease over their retirement years, until eventually it runs out completely (assuming they haven’t died first). If there is money remaining in your pension account when you die, it will be paid to your beneficiaries or your estate.
This is not the only option for accessing your super after retirement, so it’s important to speak with a professional.
Visit the Nationwide Super website for more information about how an account-based pension works and how much you can take out from your pension account.