Accessing super when you retire - accumulation to pension phase

Do I have to fill out any forms? Do I have to notify my super fund?

Once you stop working, one of your main (possibly only) source of income also ceases. Your superannuation benefits which have been accumulating during your working life, via contributions made by your employer (and possibly additional contributions made by you, your spouse or the government), are now potentially accessible to you, subject to meeting certain conditions¹. Your super fund will need to be notified, and they will have a range of forms that can facilitate the next steps.

You may want to consider seeking advice from a qualified professional when thinking about accessing super, as they will be able to assess your personal situation and provide appropriate financial advice to you.

Do I have to transfer my super to a pension account?

When a person retires after reaching their preservation age², they can request their superannuation monies to be moved to an account-based pension structure. In other words, they can request their superannuation to be moved from accumulation phase, to drawdown (or pension) phase.

Transferring superannuation from accumulation phase to pension phase is not compulsory. However, there may be some tax advantages to transferring your super from an accumulation account to an account-based pension.

Does the tax rate on my super change?

Investment earnings on your super in accumulation phase is generally 15%. If and when your super monies are converted to an account-based pension account, the tax rate on investment earnings reduces to zero. Note that depending on your age when you are drawing down a pension, you may still incur tax on the actual pension payments (if under age 60). Once you turn 60, most drawdowns are tax free in your hands.

How do I take out money? Can I take as much as I want out as often as I like? Are there rules and restrictions in accessing super?

Once you have reached your preservation age and have ceased all gainful employment, there are no restrictions on the maximum amount that can be withdrawn from a super or pension account.

The rules do however specify:

• a maximum amount that can be transferred to a pension account, currently set at a maximum of $1.9 million across all pension accounts you may have (this amount applies if you are starting your first pension since 1 July 2023, and anything above this can either be withdrawn from the super system or remain in an accumulation phase account and be subject to the concessional 15% tax rate on earnings), and
• a minimum drawdown requirement for monies held within a pension account, which start at 4% of your account balance at commencement and each 1 July thereafter, if aged under 65.

As you get older, the minimum percentage increases gradually. A pension is a zero percentage tax structure but you are required to withdraw a proportion of your accumulated savings, to be able to continue to enjoy the concessional tax treatment it receives.

If your pension income exceeds your living expenses, it’s worth considering where you place this excess. Depending on this, any income generated from the excess funds may result in a personal tax liability.

Is it a good time to change my investment strategy?

This should be part of the broader discussion with your advice professional, but generally speaking, when people move from ‘accumulating’ capital for their retirement to ‘drawing’ on their capital, this usually coincides with a “re-setting” of a person’s asset allocation, as part of their overall investment strategy.

What happens if I retire and start accessing super and then change my mind and go back to work?

Whilst a declaration of genuine intent to cease all gainful employment after reaching your preservation age will potentially make accumulated super monies available, this does not mean you are ever prevented from returning to work. Changing one’s mind (for whatever reason) and returning to work will not reverse the above process, although it does potentially mean that new contributions to super may be preserved until you satisfy (or re-satisfy) a new ‘condition of release’.

In summary, it is recommended that professional advice is sought from a suitably qualified adviser, as this will mean your superannuation savings are within the appropriate structure and have the right investment mix to help you through your retirement years.

Next: Developing a retirement savings plan

References

¹ The ATO has a useful summary on the circumstances in which you can access your super.
² Your preservation age is based on your date of birth.