Superannuation and the Age Pension: how your super is assessed

For most Australians reaching retirement, superannuation is the largest single item in the Age Pension assessment. How it is counted depends on what kind of super you have and, in some cases, when you started it. This guide covers the four situations the advanced estimator handles.

Super is not counted until you reach Age Pension age

Superannuation in an accumulation account is exempt from both means tests while you are under Age Pension age. This matters for couples: if one partner is younger, their accumulation super is ignored until they reach pension age themselves. Once an account-based pension has been started, however, it is counted regardless of age.

1. Accumulation accounts

Once you reach Age Pension age, the full balance of an accumulation account counts as a financial asset under the assets test and is deemed under the income test. Investment earnings inside the fund are ignored; only the deemed amount counts.

2. Account-based pensions

An account-based pension (sometimes called an allocated pension) started on or after 1 January 2015 is treated the same way as an accumulation account: the balance is an assessable asset and is deemed. The pension payments you actually draw are not counted as income, only the deemed amount is.

3. Grandfathered account-based pensions

If your account-based pension started before 1 January 2015 and you have received an income support payment continuously since then, it is grandfathered. The balance still counts as an asset, but the income test uses your actual annual payments less a deductible amount, rather than deeming. For many people this is more favourable, which is why changing or restarting a grandfathered pension deserves advice first: a new product loses the grandfathering.

4. Defined benefit pensions

Defined benefit schemes, common among former public servants and members of older corporate funds, pay a set income rather than holding a balance. There is usually no asset value counted, but the gross fortnightly payment counts as income, reduced by a deductible amount that reflects the tax-free component of the pension. Since 2016 that deductible amount has been capped at 10% of the gross payment for most schemes.

Lifetime income streams

Lifetime annuities and similar products purchased on or after 1 July 2019 receive concessional treatment: generally 60% of the purchase price counts as an asset until you reach a threshold age, then 30%, and 60% of each payment counts as income. The advanced estimator includes a field for these products.

How much super do you need?

There is no single answer, because super, other assets and income all interact. A single homeowner with $300,000 in super and little else will generally receive a substantial part pension; with $700,000 the assets test cuts the pension out almost entirely. The advanced estimator has a separate step for each type of super, so you can see how your own mix is assessed, and what changes if you draw down or restructure.