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Retirement income

There are a number of options to consider when deciding how to fund your lifestyle in retirement. It’s worth talking to a financial adviser about your own situation and needs for your retirement. 

Drawing a pension income

You can start drawing a pension income from your accumulated superannuation funds once you reach ‘preservation age’. Those born prior to 1 July 1960 can access their super at 55, and this increases in yearly increments up to those born since 1 July 1964. In special circumstances, such as severe financial hardship, permanent incapacity, or moving overseas permanently, it may be possible to access your super earlier.

Preservation ages

Date of birth Preservation age
Before 1 July 1960 55
1 July 1960 to 30 June 1961 56
1 July 1961 to 30 June 1962 57
July 1962 to 30 June 1963 58
1 July 1963 to 30 June 1964  59
1 July 1964 or later  60

Drawing a pension income is highly tax-effective. Prior to age 60 pension income payments are taxed at your marginal tax rate less a 15 per cent tax offset, and after 60 they are tax free. How you draw income leading into retirement requires careful planning to take account of your age, your partner’s age, and the income available from non-super assets.

In the event of death a pension may be paid to a dependant, including your spouse and dependent children based on your beneficiary nominations.

Drawing a pension income from your DIY super fund

You can also draw a pension from your DIY super fund. The same basic rules about accessing a pension apply. However, the pension component has to be structured separately and there are substantial compliance and reporting requirements. Due to the complexities, it is essential to seek professional advice if you have a DIY super fund and are considering drawing a pension income.

Annuities

An annuity is like a reverse life insurance policy. You invest a sum of money and the life company guarantees to pay you an income, sometimes inflation-linked, for the rest of your life. Some annuities allow income to revert to a partner. The attraction of annuities is that they guarantee you an income no matter how long you live. The disadvantage is that the cost of providing this guarantee can substantially reduce your income compared to an account based pension and they leave nothing for beneficiaries when you die.

Government age pension

While superannuation is the most tax-effective way to save for retirement many people with substantial assets are still able to claim a government pension, with the amount dependent on their other assets and income. A couple who own their home and have up to $252,500 in other assets can earn up to $248 per fortnight and still be eligible for the full age pension. They would be eligible for a part pension up until they reached $928,000 in other assets.

The government pension access age is currently 65 for men and 64 for women, but this will gradually increase to age 67 for both sexes for people born in 1957 or later. Apart from the additional income from a government pension it means you can receive a Seniors Health Card providing discounts on health and other benefits.

What’s next?

Perpetual or Perpetual Group means Perpetual Limited, ABN 86 000 431 827, and its subsidiaries. Perpetual Private advice and services are provided by Perpetual Trustee Company Limited (PTCo), ABN 42 000 001 007, AFSL 236643. This information has been prepared by Perpetual and contains information contributed by third parties. It contains general information and is not intended to provide you with advice or take into account your objectives, financial situation or needs. You should consider whether the information is suitable for your circumstances and we recommend that you seek professional financial, tax and/or legal advice. The information is believed to be accurate at the time of compilation and is provided by Perpetual in good faith. However, the statements including assumptions and conclusions are not intended to be a comprehensive statement of relevant practice or law that is often complex and can change. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information.