What happens to your super at retirement?

While you’re planning to stop working, your super can keep working for you. Until you take action, your money will remain in your super account, continuing to fluctuate in value based on market and investment returns. 

Below we provide general information about some of the investment options for your super. Deciding on what to do with your super money doesn’t have to be an all or nothing choice. Depending on your individual circumstances and your retirement goals, your next steps may include a mix of options. You should consider speaking to a financial adviser before deciding what is best for you. 
 

Account-based pension 

Get a regular income from your investments

This option is designed to provide you with a regular income payment in retirement, from the money you’ve saved in super. 

To receive an account-based pension (also known as an allocated pension), you transfer your money from your super account into an account-based pension account. Just like your super, your money can be invested in a range of different asset classes, and these are subject to similar risk and returns. 

Depending on your chosen provider, you usually have some choice in how the money is invested, how often you receive payments, and how much you want to receive. Your payments are also subject to minimum Government requirements. 

An account-based pension is different to the Government’s Age Pension, as it uses your own money that you have saved in super.

Account-based pension payments are usually tax free for people aged over 60. However, the total account balance and payment amounts are factored into the income and asset test for the Age Pension. 

Once your account balance reaches $0, your payments will stop.

Government website Moneysmart, has a calculator which may help you work out how long your super savings could last using an account-based pension.
 

Annuities 

Guaranteed income for fixed terms or for life 

These are low risk investment products that guarantee a regular income, either for a fixed term or for life. You can purchase annuities using your super or other personal savings. When you apply for an annuity, you can determine how much you want to invest, how often you receive payments, for how long, and whether you want indexation applied. With these factors in mind, your preferred provider can give you a quote that details what and when your payments will be. 

Unlike your super, the money you invest in an annuity isn’t subject to market fluctuation. As you don’t get to choose where the money is invested, annuities may be considered less flexible than an account-based pension. And once you agree on the payment amount, frequency and term, they can’t be easily changed. What you do get, however, is the certainty and peace of mind of knowing exactly what and when your future payments will be. 

An annuity term can be as short as 1 year or up to 30 years, with some providers selling lifetime annuities, which guarantees you an income for life.

Once you’re over 60, annuity payments are generally tax-free if purchased with super money. However, the purchase price and income payments will be factored into your income and asset test for the Age Pension. Lifetime annuities are generally factored at 60% of the asset and income value for Age Pension assessment. 

Resolution Life offers a guaranteed annuity product -  find out more about the product and review the product disclosure statement (PDS).
 

Lump sum withdrawals 

Your money, your way 

Another option you have is to withdraw your money from your super account. You might choose to make a full withdrawal and close your super account, or a partial withdrawal. If you choose to withdraw just some of your money, your remaining funds can stay invested in your super fund account. 

Why choose a lump sum withdrawal? For some people, it’s about clearing debts, taking that dream world trip or making new investments. For others, it’s about the security of having cash in the bank and not having to rely on income payments. 

It’s worth keeping in mind, however, that once you withdraw your money from super, you may have to pay income tax on any interest or earnings from that money. 

Before withdrawing money from your super, it could be helpful to create a household budget. Your budget should consider how you plan to spend any lump sum withdrawals and how long you expect (or need) your money to last. Keep in mind that once it’s spent, it’s gone.