Navigating retirement income in Australia can be complex, especially when it comes to understanding the difference between the Age Pension and a retirement pension account.

While both provide financial support in retirement, they operate under different systems, with distinct eligibility rules and implications for your overall income strategy.

Understanding the Age Pension in Australia

The Age Pension is a government-funded payment designed to support older Australians who meet specific criteria. Managed by Centrelink, it’s available to individuals who:

• Are aged 67 or older (as of 2025)
• Meet residency requirements
• Pass income and assets tests

The Age Pension acts as a safety net for those with limited retirement savings and is paid fortnightly. Eligibility is reassessed regularly, and your financial situation—including income from other sources—can affect how much you receive.

What is a Retirement Pension Account?

A retirement pension account allows retirees to draw regular income from their accumulated super savings. The most common one is known as an account-based pension. This is not a government payment—it’s managed by your super fund and offers flexibility in how much and how often you withdraw funds.

To access a retirement pension, you must:

• Reach your preservation age (age 60)
• Meet a condition of release, such as retirement or reaching age 65 (even if you haven’t retired)

Unlike the Age Pension, there are minimum withdrawal requirements set by law, but you can tailor your payments to suit your lifestyle and financial needs.

Key Benefits of a Retirement Pension account

Tax-Free Investment Earnings

Once you move your super into a pension phase account, the investment earnings—like interest, dividends, and capital gains—are generally tax-free. That means more of your money stays invested and working for you.

Flexible Income Access

You’re in control. Choose how much and how often you’d like to receive payments, whether it’s monthly, quarterly, or annually. It’s designed to fit your lifestyle and cash flow needs in retirement.

Keep Growing Your Retirement Savings

Even while you’re drawing an income, your remaining balance stays invested. This gives your money the potential to continue growing, helping your retirement savings last longer.

Key Differences Between Age Pension and Retirement Pension

Understanding the difference between Age Pension and the retirement pension through your super is crucial for effective retirement planning:

How Your Retirement Pension Can Affect Age Pension Entitlements

Drawing income from your super can impact your Age Pension eligibility due to the pension income and assets tests. Centrelink assesses your total financial situation, including:

• The balance of your retirement pension account
• Apply an income assessment
• Other assets and investments

This means that even if you qualify for the Age Pension, your payments may be reduced depending on how much you have held in your retirement pension. Centrelink provides additional information on the treatment of income streams.

Planning Your Retirement Income Strategy

Combining both the Age Pension and a retirement pension can be part of a smart retirement planning strategy. Many Australians use their super to supplement the Age Pension, ensuring a more comfortable lifestyle.

If you're considering a transition to retirement pension, or you're unsure how your choices affect your entitlements, it’s wise to speak with a financial adviser or use tools like Centrelink’s Income and Assets Calculator.

Final Thoughts

Retirement should be a time to enjoy life, not stress over finances. By understanding the roles of the Age Pension and retirement pension accounts, you can make informed decisions that support your goals and lifestyle.

Let’s get in touch

Getting expert help is all part of being with IOOF. As a service to our members, our team of Financial Coaches* provide general advice related to your super, at no additional cost.

If you are a member with us, book an appointment with a Financial Coach today.

Our financial coaches also offer a Government Age Pension concierge service. This service is available to members where they, their spouse, or their de facto partner, are aged 66 and above.

* The Financial Coaches, Super Advisers, Education Managers and Client Relationship Managers provide financial advice under the Australian Financial Services licence (AFSL) of Actuate Alliance Services Pty Ltd ABN 40 083 233 925 AFSL 240 959 (Actuate). IOOF Investment Management Limited (IIML) ABN 53 006 695 021 AFSL 230524 is the trustee of the IOOF Portfolio Service Superannuation Fund ABN 70 815 369 818 (Fund). Actuate and IIML are both part of the Insignia Financial group of companies, comprising Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (Insignia Financial Group). IIML has an arrangement in place in which Actuate has been appointed to provide general and limited non-ongoing personal advice services (which includes simple super advice) to members of relevant products in the Fund. Neither IIML, nor any other entity within Insignia Financial Group, including any other entity within the Insignia Financial Group that is a trustee for a regulated superannuation fund, is liable for or responsible for any work, action or advice provided by Actuate. For important information about Actuate’s services which you should know before making a booking, please refer to Actuate’s Website Disclosure Information.