Pension refreshing: How to add to your super pension

In this guide

Background
Option 1: Start a new pension
Option 2: Refresh (commute) an existing pension and start a new, larger pension
The transfer balance cap
What else to consider
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For various reasons, it’s common to continue making super contributions even after you‘ve already started a pension with your super savings.

Perhaps you’re drawing a pension while you continue to work and make concessional contributions. Maybe you’re retired and taking advantage of the opportunity to contribute to your super until you reach 75. Or perhaps you’d like to make a downsizer contribution.

Learn more about contributing to super after you turn 60, downsizer contributions and transition to retirement pensions.

Contributing while drawing a pension raises a common question. How do you get your new contributions into your pension account? Contributions and transfers from another super account can’t be added to an existing pension, so additional steps are required.

There are two main options. You can:

Stop your existing pension, combine the balance with your accumulated contributions and then start a new, larger pension (known as a pension refresh)
Use your accumulated contributions to start a new pension alongside your existing account, maintaining multiple pensions.

This article covers simple account-based pensions. If you have a lifetime or fixed-term pension instead, read more about how these products work and why the strategies here may not apply.

Before deciding which approach to take, it may be important to consider how the process could affect the tax components of your savings.

Background

Accumulation accounts

Prior to starting a pension from your super fund, your super is held in an accumulation account. Most public offer super funds will permit you to have more than one accumulation account in the same fund, but in a self-managed super fund (SMSF) you can only have one per member. In the accumulation phase, investment earnings are taxable at the rate of 15%.

When you make a non-concessional contribution, it is added to the tax-free component of your accumulation account. Investment earnings and concessional contributions make up the taxable component. Any withdrawals are drawn proportionately from the taxable and tax-free components that exist on the day of the withdrawal.

Pension accounts

No matter the type of super fund, you can have multiple pension accounts. Investment earnings on retirement phase pension accounts are tax-free, while earnings on transition to retirement pensions remain taxable at the same rate as accumulation accounts.

You can’t add more contributions to a pension or transfer additional money from an accumulation account to a pension once it has started.

The tax-free and taxable proportions are set on the day you open the pension and remain fixed. For example, if you start a pension with a 100% tax-free component, it will remain a 100% tax-free component until the account is closed.

The tax components of your super are important if your account will be paid to adult children or other non-dependant beneficiaries after you pass away, because death benefits tax will be payable on the taxable portion. A recontribution strategy can help maximise the tax-free component.

Learn more about tax on death benefits and the recontribution strategy.

Option 1: Start a new pension

If you want to transfer more money from your accumulation account into a pension, the simplest option is to start a new pension account.

To do this, you need to fill in an application with your super fund for the type of pension you want to open. This can usually be done online. The application will ask where money should be transferred from to start your new pension. Here you can nominate the accumulation account that you’ve added your contributions to.

Once the application is complete, you will have another pension account that is managed separately from the one (or more) you already have. You need to withdraw at least the minimum annual payment from each pension and choose investment options and beneficiaries for each of them.

Keeping your accounts separate from one another can be helpful in some situations. For example, if you want to keep taxable and tax-free components apart during a recontribution strategy, or you want to leave a tax-free pension to a non-dependant beneficiary and a taxable pension to a dependant who will not be liable for tax on the payment.

Learn more about a dual pension strategy.

Example

Tuah (69) has an existing account-based pension within his super fund valued at $690,000. This pension is 5% tax-free and 95% taxable component. He wants to reduce the taxable component in case his partner dies before him and his remaining super is paid out to his adult children, who would need to pay up to 17% tax on the taxable component.

Tuah withdraws a lump sum of $390,000 from his pension account. He then opens a new accumulation account and makes a non-concessional contribution with the $390,000 he withdrew using the bring-forward rule. He had no existing accumulation balance in his super fund at the time of making that contribution.

Tuah immediately commences a new (second) account-based pension from his fund.

Because his entire accumulation balance was made up of a tax-free component (from the non-concessional contribution), this new pension is also 100% tax free. All earnings the fund generates on this new pension account will be allocated to the tax-free component.

Moving forward, Tuah has two separate pensions from his fund:

Pension 1: $300,000

Taxable component: $285,000 (95%)
Tax-free component: $15,000 (5%)

Pension 2: $390,000

Tax-free component: $390,000 (100%)

Both pensions will keep the same tax-free and taxable percentages until they are closed.

Tuah plans to withdraw the minimum from his tax-free pension (pension 2) to maximise the amount of tax-free component he keeps in super. He will withdraw more than the minimum from the pension that holds the taxable component (pension 1) to meet his income needs.

In three years, when his bring-forward period ends and he is permitted to make further non-concessional contributions, Tuah plans to withdraw the remaining balance of pension 1 and contribute it to a new accumulation account. This will convert the remaining taxable component in that pension to a tax-free component. He can then use the new accumulation account to start another pension or to refresh pension 2 (see below).

Option 2: Refresh (commute) an existing pension and start a new, larger pension

Instead of starting a second pension, you can arrange for your current pension to be commuted (stopped) and rolled back into the accumulation account that holds your contributions.

When the entire amount you want to use for the new pension is combined in your accumulation account, you can start your new pension.

The process is generally as follows:

Make your planned contributions to your accumulation account
Complete a request for your super fund to close your existing pension and add the remaining balance to your accumulation account (either online or with a paper form)
Your fund will make any required minimum withdrawal to you from your pension before closing your account. The minimum is pro-rated for the proportion of the financial year your pension was open and considers any minimum payments you have already received
Complete an application for your new pension account (either online or with a paper form).

Be aware that the tax components in your pension and accumulation account will mix if you complete this process.

Need to know

Commuting and restarting a pre-2015 account-based pension could have a negative impact on your Age Pension, Department of Veterans’ Affairs and Commonwealth Seniors Health Card entitlements. This is because account-based pensions started on or after 1 January 2015 generate deemed income for Centrelink income test purposes, while pensions commenced prior to this date are assessed using deductible amount rules if you have been receiving an Age Pension or other income support payment continuously since that time.

Example: Revisiting Tuah

If Tuah (from our first example) had instead combined his existing pension with his new accumulation account before starting a new pension with the combined balance, his tax-free and taxable components would be mixed. His new pension would be made up of:

Taxable component: $285,000 (41.3%)
Tax-free component: $405,000 (58.7%)

In three years, when Tuah wants to make a further withdrawal and recontribution, his withdrawal will be drawn proportionately from the components according to these percentages.

For example, if he withdrew $390,000, it would be made up of a $161,070 taxable component and $228,930 tax-free component.

Unless his total balance has fallen to $390,000 or less, the withdrawal will not eliminate the taxable component in his super.

Example: Topping up a transition to retirement pension

Jeremy is 62 and working. He has a transition to retirement (TTR) pension with a balance of $180,000 and has been salary sacrificing to his accumulation account that has a current balance of $35,000.

Jeremy wants to top up his TTR pension for the new financial year to increase the maximum amount he can withdraw. Without a top up, his maximum will be $18,000 (10% of $180,000) for the year.

For now, Jeremy is not worried about his tax components. He plans to complete a recontribution strategy after he retires in six years.

Jeremy asks his super fund to close his TTR and put the balance in his accumulation account.

He then applies to start a new TTR with $210,000, leaving $5,000 in his accumulation account because this is the minimum balance his super fund requires.

The new TTR pension will have a maximum payment of $21,000 for the financial year (10% of $210,000).

The higher maximum tax-free withdrawal means Jeremy can afford to salary sacrifice more into his accumulation account during the year, boosting his tax savings and his super balance.

Example: Using a second accumulation account

Susanna (68) is working and contributing to super. When she turned 65, she withdrew her entire super account balance and recontributed it as a non-concessional amount. She used that contribution to start an account-based pension with a 100% tax-free component and the current balance of that pension is now $250,000.

Susanna has since had employer contributions and her own salary sacrifice added to her accumulation account. It now has a balance of $50,000 that is 100% taxable component.

She has now sold her house to move to an apartment and wants to make a downsizer contribution of $300,000 to add to her pension.

If Susanna contributes to her existing accumulation account, the tax-free downsizer contribution will mix with her taxable super. She wants to avoid this, so she asks her super fund to open a new accumulation account for her instead.

Remember: Opening a second accumulation account is not possible in an SMSF, but most other super funds will do it for you.

Her new position is:

Accumulation account 1

$50,000 taxable component

Accumulation account 2

$300,000 tax-free component (downsizer contribution)

Pension account

$250,000 tax-free component

Susanna can now request her fund close her pension and add it to accumulation account 2 with her other tax-free amount. She can then apply to start a new pension with the combined balance and the new account will remain roughly 100% tax-free.

A small taxable component may arise if it takes the fund a few days to act on all Susanna’s instructions because investment earnings in the new accumulation account will be added to the taxable component during the time before the balance is used to start a new pension.

If Susanna had an SMSF, she could instead consider starting a second pension with her taxable accumulation balance before making her downsizer contribution. Then, her downsizer amount could be added to her empty accumulation interest, combined with a commutation from her first pension, and used to start a new pension containing a 100% tax-free component. By emptying the accumulation interest before contributing, she would avoid mixing tax components. If she wished, she could commute the taxable pension after her new tax-free pension was in place, transferring those savings back into her accumulation account.

Need to know

If you want to open a second accumulation account with your fund, you need to provide them with clear instructions. Super funds are required to merge multiple accumulation accounts held by the same member if it is in the member’s best interests – so without instructions from you clarifying your wishes, the fund may go ahead and combine your accounts.

The transfer balance cap

The transfer balance cap places a limit on the amount you can add to the tax-free retirement phase of super. In 2026–27, the general transfer balance cap is $2.1 million. If you started a retirement-phase pension before 1 July 2026, your personal cap is lower and can be viewed online via the ATO service using myGov.

Some people are concerned about closing and restarting pensions and the transfer balance cap, believing starting new accounts will continue to add to the amount of the cap they have consumed and take them above the limit.

It is important to monitor your transfer balance cap, but there is a simple process to avoid double-counting of the same money when you move back and forth from retirement phase to accumulation phase.

Any amount you remove from an existing retirement income stream by transferring back to the accumulation phase or cashing a lump sum is subtracted from your transfer balance account, which makes space under your cap for you to start a new pension.

Learn more about the transfer balance account and transfer balance cap.

What else to consider

Maintaining multiple pension accounts can add to your costs. Check how your super fund charges fees for pensions and whether any additional cost for maintaining more than one pension is worthwhile.

A pension refresh avoids this ongoing cost, since you end up with a single account rather than several, though it comes with the trade-off of mixing your tax components.

If your fund has lower percentage-based fees for higher balances, it’s worth asking if they can use the combined balance of all your accounts to determine your charges instead of having them applied per account. You may like to shop around to find a fund with a fee structure that suits you better.

If you decide to commute an existing pension that was initially established as a reversionary pension, you may want to add a reversionary nomination to your new pension.

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