Welcome, skip to the content.
The Investment and Financial Services Association (IFSA) estimates that most people need approximately 65% of their pre-retirement income to maintain their current lifestyle in retirement. For example, if you earn $50,000 a year while you’re working, it’s estimated that you would need approximately $32,500 a year to maintain your current lifestyle in retirement.
The most popular ways of funding your retirement are through super, or other investments, e.g. managed funds, direct property, the share market or deposit accounts.
Superannuation
Super is one of the most tax-effective ways to save for your retirement. You have the potential to generate greater retirement income than would be possible with most non-super investments because you’re paying less tax on your super earnings; therefore you’re able to invest more.
However, the downside is the Government doesn’t allow you to access your super until you have reached your 'preservation age'. (Refer to the 'When can I access my super?').
Non-superannuation investments
An alternative approach is to fund your retirement by putting money into non-super investments. These can be ‘direct’ investments, such as cash, property and shares, or ‘indirect’ investments, such as managed funds.
Generally speaking, superannuation is preserved until you retire; this means it can’t be withdrawn until that time. However, some people may have part of their account classed as unrestricted non-preserved, this means it may be withdrawn at any time, and any restricted non-preserved portion may be withdrawn when employment is terminated. Your Statement will tell you if you have any non-preserved monies in your account.
In other limited circumstances you may be allowed to withdraw some of your preserved superannuation such as:
You may access your super once you reach age 65 whether you have retired or not. Please note, under the 2006/07 Federal Budget legislation a person may now retain their superannuation funds (in the accumulation phase) on an indefinite basis until death.
Your preservation age (i.e. the age at which you generally have access to money in superannuation investments) depends on when you were born.
| Date of birth |
Preservation age |
| Before 1 July 1960 |
55 |
| 1 July 1960 - 30 June 1961 |
56 |
| 1 July 1961 - 30 June 1962 |
57 |
| 1 July 1962 - 30 June 1963 |
58 |
| 1 July 1963 - 30 June 1964 |
59 |
| After 1 July 1964 |
60 |
An income stream can be a pension or an annuity. A pension can only be purchased with superannuation money. An annuity can be purchased with superannuation and non-superannuation money, through a life office.
The main types of pensions offered by EquitySuper are:
Allocated pension
An allocated pension provides a regular income stream from your superannuation after you’ve retired. Allocated pensions are investment-linked, and how long the pension lasts will depend upon your starting balance, ongoing investment returns, the amount of your annual pension payment and the amount of any cash drawdowns. There are no guarantees that your allocated pension will last for your entire lifetime.
The pension payment from an allocated pension is taxed favourably, and you can access your capital any time if you need to. When you die, the balance of your allocated pension account is paid to your estate and/or your dependants, according to the rules of the particular product.
Term allocated pension (also known as a market-linked pension)
A term allocated pension pays you a regular income over a fixed term. It's calculated according to your life expectancy, using payment factors specified by the Government.
Each year your annual payment is calculated using the plan balance, the remaining term and the payment factors.
A term pension meets the eligibility requirements for a ‘complying income stream’. This means it meets the criteria for the pension Reasonable Benefit Limit (note that limits of benefits will no longer apply from 1 July 2007) and social security asset test 50% exemption (the 50% assets test exemption will not apply to new pensions or annuities purchased from 20 September 2007). Generally, you can't make lump sum withdrawals from a complying pension.
The rules about different income streams are complex, and you should consult a financial planner before you invest in an income stream.
There are a number of changes which may affect people who already have a pension. One of them is the new scaled Minimum Annual Pension based on age (see table below).
If your current pension falls at or above the minimum amount worked out using the account balance as at 1 July 2007 then you do not need to do anything – unless you wish to vary this to any amount at or above the minimum.
If your current pension payment is below the minimum as at 1 July 2007, you need not increase this to the minimum, unless you wish to do so. That is, your existing pension is deemed to meet the requirements of the existing Rules.
Minimum Annual Pensions
Individuals will be able to choose an amount at or above the minimum they take from their pension each year. The minimum pension payments are set out below.
| Age |
% of account balance |
| Under 65 |
4 |
| 65 - 74 |
5 |
| 75 - 79 |
6 |
| 80 - 84 |
7 |
| 85 - 89 |
9 |
| 90 - 94 |
11 |
| 95 or more |
14 |
Example 1
If you are age 67 and your account balance is $400,000, then your minimum annual pension would be $20,000 (5% of $400,000) or $1666 per month.
Example 2
If you are age 87 and your account balance is $400,000, then your minimum annual pension would be $36,000 (9% of $400,000) or $3,000 per month.
The above all depends on the type of income stream you currently have and whether you will be able to move it to the new, more flexible pension rules without having to commute and start a new pension from 1 July 2007. Furthermore, you have the option to maintain the existing pension rules.
If your income stream is a ‘complying’ income stream, you will not be able to commute and transfer to the new pension.
Complying income streams include the following:
It should be noted that since 1 July 2005 people at ‘preservation age’ have been able to take their benefits as a non-commutable income stream while they are still working.
These transition to retirement rules have been amended to include pensions meeting the new minimum standards. From 1 July 2007 transition to retirement income streams allow no more than 10% of the account balance (at the start of each year) to be withdrawn in any one year. The existing non-commutability rules for income streams commenced under the transition to retirement measure continue to apply. Income streams started before 1 July which comply with the transition to retirement rules at the time, satisfy the new requirements.
If you die with a super fund account balance it will be paid to your eligible beneficiaries. The Trustee will look at your personal circumstances, including the beneficiary you have nominated and determine whom to pay the benefit.
It is important to keep your beneficiary nomination current and update it whenever your personal circumstances change, for example if you marry or have children.
You can update your beneficiary nomination by completing a Death Benefit Beneficiary Nomination Form.
The financial aspect of retirement planning covers a number of complex areas, such as investment strategies, taxation and social security. If you have access to the internet, ASIC (Australian Securities and Investment Commission) publishes a lot of valuable information on the web. A good place to start is www.fido.asic.gov.au
For specific advice regarding your super and financial future, contact EquitySuper by telephone on 1300 659 799 or by email to advice@eqtsuper.com