When you think about your retirement and how you’re going to pay for it, you may only consider your super balance. But around 62% of Australians over the age of 65 receive a part or full Government Age Pension payments1 , and the two can work together to support you in retirement.
Super is the main source of retirement income for many people living in Australia. But, a large percentage of the retired population also qualify for some level of Government Age Pension payment. These extra payments can support your super and help you manage your retirement budget.
The balance between super and the Age Pension is different for everyone but understanding both can help you feel more confident about your retirement.2
Find out how your super and the Government Age pension can work together.
Retirement income – Government Age Pension Vs Super
|Super||Government Age Pension|
|Can access once you reach preservation age and meet a condition of release||Can apply at qualifying age, if eligible.|
|Money is from your savings over your working life, held in your super fund.||Money is from the government.|
|You choose how much you access and when.||Your payment amount is set by the government and based on a range of eligibility tests, including residential status, income and assets.|
Over your retirement you can keep money invested in your fund so it could continue to gain investment returns. The investment returns will depend on the option you have selected and are not guaranteed.
You can transfer a specific amount to your bank account regularly and also a lump-sum amount as needed, while the balance of your super stays invested.
|Money is paid into your bank account.|
|Designed as retirement income source.||Designed as retirement income support – a safety net for those with no super, or to support super savings|
Super and the age pension – working together
If you’re eligible for the Age Pension and have super, it’s important to know how they work together so you can maximise your income. How you access your super could have a big impact on your retirement.
Case study: Diana’s story
Diana’s a single home-owner who’s retiring at 66 with a super balance of $150,000.
She contacted Centrelink about her Age Pension eligibility and was told that she can receive the full Age Pension, including an energy supplement, which is $944.30 per fortnight for singles and $1,423.60 per fortnight for couples combined ($711.80 for each person in the couple) per fortnight3.
Diana needs to decide what to do with her super savings. She has 2 options:
- Withdraw all of her super at once and move it into a bank account
- Opt to open an account based pension with her super fund, which will allow her to access her super as a regular payment into her bank account, in a similar way to wages. This option provides a regular income stream.
Diana decides she doesn't want the responsibility of managing such a large sum of money all at once. So, she decides to open an account based pension with AustralianSuper. This is called a Choice Income account. She sets up her Choice Income account to pay into her bank account every month.
Because Diana is also eligible for the Age Pension these payments can also be sent to her same bank account giving her a clear overview of what she can spend.
Life expectancy and your super
For this example let’s assume that Diana lives to 91. Statistics tell us there's a 4 in 10 chance she will4. That puts her in retirement from 66 - 91. 25 years.
Diana’s $150,000 super is split across those 25 years. That’s an average of $150 a week, which gets transferred into her bank account from her AustralianSuper account based pension, on top of the Age Pension payment she’s entitled to. ($944.30 a fortnight for singles and $1,423.60 for couples.)
Drawing an income from your super to supplement the Age Pension can make a big difference to the amount of money you have each week. By using her super to top up her Age Pension payments, Diana will increase her budget by 32.4% a week.
Have a look at the table below:
|Retire at 65 with a super balance of:||Average weekly income from super you can expect to receive on top of your Age Pension entitlement||Increase in retirement income on top of the Age Pension|
The above information in Diana's story is provided to give you an idea of how your super might work with the Age Pension in retirement. To make these calculations, we had to make some assumptions.
Calculate your retirement income
A calculator such as AustralianSuper’s SuperProjection Calculator can help you estimate how long your super will last and give you an idea of how the Age Pension can help supplement your income. It’s based on some select factors, such as your income and assets if you have a partner, and your current super balance. These tools can help you to visualise your retirement.
Using you super as an income – account based pensions
Your super balance will vary compared to someone else’s, and how you choose to access and use your super will differ too. It’s a personal choice.
Some people may move their savings into a bank account, some will open an account based pension. An account based pension is a specially designed retirement account that lets you access your super as an income, paying money into your bank account in a way that suits your needs, for example on a monthly basis5.
For many Australians, who are used to a regular income, moving all your super into a bank account can be overwhelming, as you’re left with a large sum of money to manage. Options such as account based pensions are a popular choice for many retirees, as they help you to manage your super balance in retirement – which for many can be over 25 years.
Confidence in retirement planning
Recent research into retirement confidence by AustralianSuper and Monash University found that people aged 50 and over – who take some time to understand and plan their finances – are less anxious about transitioning into retirement, and more confident overall about their retirement options.
Knowing how much of the Age Pension you could be eligible for can help you understand your finances in retirement. For many, a qualified financial adviser with knowledge of superannuation and retirement planning can help you get the right balance, and help you understand your assets, where needed.
Did you know you can transition to retirement over time
You don’t have to give up your working life overnight.
Many people like to stay connected to the workplace for financial and social reasons. Transitioning into retirement by going from full-time work to casual or part-time work is becoming a popular way of getting more out of your super and adjusting to a new, post-work lifestyle.