Minimum pension payments

What is the minimum pension payment?

Your minimum pension payment, or minimum drawdown rate, is an amount set by the government that needs to be paid out of your account-based pension, or other super income streams, each financial year. The minimum pension drawdown rate is determined by your age and increases as you get older.

The government had temporarily reduced the minimum pension drawdown rate by 50% in response to Covid-19. However, this reduction ended on 30 June 2023.

So, from 1 July 2023, the 50% reduction will not apply to your minimum annual payment. The figures below reflect the most recent changes.

How are the minimum pension payments calculated?

Minimum pension payments are worked out at the start of your pension, and then again on July 1 each year based on your age and account balance. The minimum drawdown rate for each age group is shown in the table below.

Note: The table above shows the standard minimum percentages for each financial year. Age is measured on the commencement day of the pension and every following 1 July.

The government halved the minimums for the following financial years: 2008/09, 2009/10, 2010/11, 2019/20, 2020/21, 2021/22 and 2022/23. The government reduced the minimums by a quarter in 2011/12 and 2012/13.

What are my minimum pension payments in the first year?

Minimum pension payments in the first year of an account-based pension are based on how much time is left in the financial year.

They’re calculated as the purchase price multiplied by the age-based percentage (from the table above) multiplied by the proportion of days left in the financial year, rounded to the nearest ten dollars.

Example 

• On 1 April, Grace (age 65) transfers $200,000 of her super savings to start an account-based pension. 
• Grace’s minimum age-based percentage from the table above is 5%. 
• There are only 91 days left in the financial year, so Grace’s minimum pension payments are reduced to reflect this. 

• This means Grace must receive total pension payments of at least $2,490 before the end of the year.  However, Grace can choose to receive more than this if she wants.

• If Grace had started her pension in June, she could choose to take no pension payments in that month.  

What are my minimum pension payments each full financial year?

Pension payments in each full financial year of an account-based pension are calculated as the 1 July account balance multiplied by the age-based percentage (from table above), rounded to the nearest ten dollars.

Example

• On 1 July, John (age 75) has an account-based pension with a balance of $300,000.  

• John’s  minimum age-based percentage from the table above is 6%. 

• This means John must receive total pension payments of at least $18,000 over the financial year. However, John can choose to receive more than this if he wants. 

What are my maximum pension payments?

There is no maximum placed on pension payments from an account-based pension. You’re only limited by your account balance.

For other super-income pensions, there's a maximum pension payment limit of 10% each financial year. These are known as pre-retirement pensions, or transition to retirement (TTR) pensions.

Can I take out more than the pension minimum?

Yes, you can take out amounts larger than the minimum pension payment for your age.  

Account-based pensions give you the flexibility to decide how often you’re paid, and how much you’d like to receive (subject to receiving the minimum pension payment). You’re only limited by the total amount of super in your account. 

In addition to your regular payments, you can also take extra pension payments or extra lump sum withdrawals at any time.

Does CFS have an account-based pension product?

Yes, FirstChoice Wholesale Pension is designed for members who are approaching retirement and wish to convert their super benefits into a flexible and tax-effective regular income stream. Learn more here.

What is the difference between a pension payment and a lump sum withdrawal?

Extra pension payments and lump sum withdrawals have different impacts on tax and social security. So, if you receive an extra payment outside of your regular payments, you’ll need to tell us if you want this treated as a pension payment or a lump sum withdrawal. 

There is no fixed rule on which is best. This decision should be based on your personal goals and financial situation. 

Here are some of the key differences:

If you’re still not sure which direction to take with your retirement wealth, or how the minimum pension payment rate might affect you, you can speak with your financial adviser or use our find an adviser service to locate one near you.

They’ll review your personal situation and help you find the solution which best suits your life-stage, financial goals, and risk tolerance.