In this guide
- What is an account-based pension?
- Minimum pension payment rates
- Calculating the first payment
- Pension payment calculator
- Pension planning tips and strategies
- What if I don’t withdraw the minimum pension amount?
- Does the minimum drawdown affect my Age Pension?
- Why does the government set a minimum payment?
- The bottom line
Self-managed super funds (SMSFs) are well known for their flexibility when it comes to retirement planning and investing, but when it comes to paying pensions to fund members, there are obligations that must be met from year to year.
If your SMSF has members using transition to retirement pensions, in retirement phase, or planning to retire soon, it’s important to review the fund’s retirement income needs and strategy. This includes ensuring the required minimum pension payments from any account-based pensions are in place.
What is an account-based pension?
Most super pensions these days are account-based pensions, so called because the pension is paid from a super account held in your name. These pensions were previously known as allocated pensions.
For SMSFs with account-based pensions, the amount supporting the pension must be allocated to a separate account for each member.
However, some government defined benefit super schemes, lifetime pension products offered by super funds, and annuities paid by life insurance companies offer non-account-based pensions where your fund will pay you a regular income over a set period, usually guaranteed for life or a fixed term. Unlike account-based pensions, these income streams do not have an identifiable account balance in the member’s name. These pensions must make payments at least annually.
Minimum pension payment rates
When you have an account-based pension, you are required to withdraw at least the minimum annual pension amount. The minimum is initially calculated on the start date of the pension using the opening balance and your age at the time. It is then recalculated on 1 July each year.
In the financial year you open your pension, the minimum payment is pro-rated to reflect the number of days remaining in that year.
Retirement phase account-based pensions have no maximum annual withdrawal.
Transition to retirement (TTR) pensions are not in the retirement phase. The minimum annual withdrawal for a TTR pension is the same as for a retirement phase pension but an annual maximum of 10% also applies. When you turn 65 or retire, your transition to retirement pension converts into a retirement phase pension with no maximum withdrawal.
Read more about starting a pension from your SMSF.
To calculate the annual minimum pension amount, your pension balance is multiplied by a percentage factor that increases as you age. The table below shows the minimum pension percentage factor for each age group.
| Age of beneficiary | Pension percentage factor |
|---|---|
| Under 65 | 4% |
| 65 to 74 | 5% |
| 75 to 79 | 6% |
| 80 to 84 | 7% |
| 85 to 89 | 9% |
| 90 to 94 | 11% |
| 95 or more | 14% |
Payments must be received at least annually between 1 July and 30 June each financial year, although many people opt to receive monthly or quarterly payments.
The minimum annual payment amount is rounded to the nearest ten whole dollars. If the amount ends in an exact five dollars, it is rounded up to the next whole ten dollars.
Learn more about planning your account-based pension withdrawals for the new financial year.
Case study
Mike is a 74-year-old retiree with $1 million in a super account-based pension within his SMSF on 1 July 2025. He needs to determine his minimum annual pension payment for the 2026 financial year.
As Mike is 74, his minimum pension percentage factor is 5%.
The minimum pension payment required is $50,000 ($1 million x 5%).
Calculating the first payment
If you start an account-based super pension after 1 July, the minimum amount for the first year is calculated on a pro-rata basis according to the number of days remaining in the financial year, including the start day (see example below).
If your super pension commences on or after 1 June, no payment is required in that first financial year.
Example
Heather, 64, opened an account based pension in her SMSF with a balance of $643,000 on 1 March 2025. As this is the first year of her pension, the minimum payment for the year is pro-rated.
There are 122 days left in the financial year, from 1 March to 30 June, so the minimum withdrawal in the first year is $8,600 rounded to the nearest 10 dollars, calculated as follows:
$643,000 x 4% = $25,720. This is the minimum for a full year
The proportion of the financial year remaining can be represented as 122 days/ 365 days
The annual minimum is adjusted by multiplying these two figures
$25,720 x 122/365 = $8,596.82
Rounded to the nearest $10, the minimum for the first year is $8,600
Heather opts to receive the minimum amount in three monthly payments of $2,866.67.
Pension payment calculator
Use the calculator below to estimate the required minimum payment in the year your pension starts, or the minimum payment for a full year.
- The relevant date is the day your pension starts (for a first year pro-rata calculation), or 1 July (for a full year calculation).
- Insert your age and balance on that date.
- The calculator will display your annual minimum pension payment amount for the portion of the financial year between your start date and 30 June, or for a full year, based on your entries.
- If you’re starting a transition to retirement pension, the calculator will also display the maximum withdrawal.
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