Account-Based Pensions in 2026: Rules, Strategies and What’s Changed

Account-based pensions continue to be a central option for Australians looking to convert their superannuation savings into a regular income stream in retirement. In 2026, these pensions offer flexibility, tax advantages, and the ability to tailor your investment approach. However, making the most of an account-based pension requires careful planning to ensure your savings last throughout your retirement years.

When you reach your preservation age and retire, or meet another condition of release, you can choose to convert your super into an account-based pension. This allows you to receive regular payments while the remaining balance stays invested. The amount you withdraw can be adjusted each year, provided you meet the government’s minimum withdrawal requirements.

Account-based pensions offer several features that make them attractive for retirees:

• Flexible Withdrawals: You can choose how much to withdraw each year, as long as you meet the minimum set by the government.
• Tax Benefits: Investment earnings in the pension phase are generally tax-free. For most people aged 60 and over, withdrawals are also tax-free.
• Investment Choice: You retain control over how your pension account is invested, allowing you to select options that suit your risk tolerance and income needs.

These features provide flexibility, but also mean you need to actively manage your pension to balance your income needs with the longevity of your savings.

Minimum Drawdown Rates

From 1 July 2024, the temporary reduction in minimum drawdown rates introduced during the COVID-19 pandemic ended. The standard minimum withdrawal rates, based on your age at 1 July each year, are now in effect. These rates set the minimum you must withdraw each financial year:

• 55–64 years: 4%
• 65–74 years: 5%
• 75–79 years: 6%
• 80–84 years: 7%
• 85–89 years: 9%
• 90–94 years: 11%
• 95+ years: 14%

There is no maximum withdrawal limit, but taking more than you need can reduce your future income.

Transfer Balance Cap

There is a limit on the total amount you can transfer from super into the pension phase, known as the transfer balance cap. This cap is indexed over time and remains in place in 2026. Any superannuation above this cap must remain in the accumulation phase or be withdrawn as a lump sum. The cap is periodically reviewed and adjusted, so it’s important to check the current limit before starting a pension.

Superannuation Guarantee and Retirement Balances

The Superannuation Guarantee rate for employer contributions has increased to 12%. This aims to help future retirees build larger super balances, potentially providing more flexibility and security in retirement. While this change primarily affects those still working, it may influence the retirement savings of people approaching retirement in the coming years.

Centrelink and Age Pension Considerations

Account-based pensions are assessed under both the income and assets tests for the Age Pension. Changes to deeming rates and thresholds can affect your eligibility or the amount you receive. It’s important to review how your pension income interacts with Centrelink rules, as even small adjustments to your withdrawals or investment mix can have an impact on your Age Pension entitlement.

With ongoing market fluctuations and rising living costs, managing your account-based pension wisely is more important than ever. Here are some strategies to consider:

Withdraw Only What You Need

Taking the minimum required withdrawal, or just above it, can help preserve your super balance and keep more of your money in the tax-free pension environment. This approach can help your savings last longer, especially if you expect a long retirement.

Review Your Investment Mix Regularly

Your investment strategy should reflect your risk tolerance, income needs, and stage of retirement. As you age, you may want to adjust your asset allocation to reduce risk or generate more stable income. Regular reviews can help ensure your investments remain aligned with your goals and changing circumstances.

Plan for Longevity

Australians are living longer, so your retirement savings may need to last 25 years or more. Consider how your withdrawal rate, spending habits, and investment choices will support you over the long term. Planning for a longer retirement can help you avoid running out of funds later in life.

Coordinate with Centrelink

Small changes in your withdrawal amounts or investment choices can affect your Age Pension entitlement. It may be beneficial to review your situation each year and adjust your strategy to maximise your overall retirement income.

Consider a Blended Approach

Some retirees choose to combine account-based pensions with other income streams, such as annuities, to provide additional certainty. This can help manage risks like market downturns or outliving your savings.

Even with a solid plan, there are some common mistakes that can undermine your retirement income:

• Withdrawing Too Much Early On: Taking large lump sums or high withdrawals in the early years can quickly reduce your balance and limit future income.
• Ignoring Investment Risk: Not diversifying your investments or being overexposed to market risk can lead to losses, especially if you need to sell assets during a downturn.
• Failing to Update Your Strategy: Life changes, policy updates, and market movements mean your approach should be reviewed regularly. Staying engaged with your pension helps you adapt to new circumstances.

The landscape for retirement income in Australia continues to evolve, with ongoing discussions about how to improve stability and advice for retirees. Account-based pensions remain a flexible and tax-effective way to draw income from your super, but they require regular attention and planning.

By understanding the rules, keeping your strategy up to date, and seeking guidance when needed, you can make the most of your superannuation and enjoy greater confidence in your retirement years.

If you want to review your investment choices or explore how insurance might fit into your retirement plan, you can learn more about insurance brokers.