SMSFs: Minimum account-based pension payments, strategies and calculator (2023)

If your self-managed super fund (SMSFs) has members in retirement phase or planning to retire soon, the new financial year is traditionally a time to review your retirement income needs and strategy.

This is even more important heading into the 2023–24 financial year. That’s because the minimum amount you need to withdraw from an account-based super pension reverts to normal rates from 1 July 2023 after being temporarily halved for four years.

Some retirees may find the new minimum payments are too high for their needs or that they have insufficient cash in their pension account to fund the increase. See the section ‘Pension planning tips and strategies’ later in this article.

What is an account-based pension?

Most super pensions these days are account-based (also called allocated pensions), so called because the pension is paid from a super account held in your name.

For SMSFs with account-based pensions, the amount supporting the pension must be allocated to a separate account for each member.

Read more about starting a pension from your SMSF.

Once you start an account-based pension, minimum annual payments are calculated on your account balance on 1 July each year, multiplied by a percentage factor that increases as you age.This is often referred to asthe minimum pension drawdown.

Minimum pension payment rates


The federal government temporarily halved the minimum account-based pension drawdown rates for the 2019–20 to 2022–23 financial years. This was in response to the financial impacts of Covid, so retirees would not be forced to sell superannuation assets to meet the minimum annual payment at a time when markets were volatile.

(Video) How do I get paid a pension from super? What is an Account Based Pension.

From 1 July 2023 the minimum annual drawdown reverts to the normal rates. That means retirees who withdraw the minimum amount will need to double their recent level of payments in the 2023–24 financial year. For those who will be celebrating a milestone birthday and turning 65, 75, 80, 85, 90 or 95, your minimum drawdown will increase even more.

The table below shows the temporary rates and the normal rates. For example, someone aged 65–74 must withdraw 2.5% of their account balance in 2022–23 under the temporary measure, but this amount doubles to 5% in the 2023–24 financial year. The percentage factor is set according to your age on 1 July in the financial year the pension is to be paid.

Age of beneficiaryTemporary percentage factor
(2019–20 to 2022–23)
Normal percentage factor
(From1 July 2023)
Under 652%4%
65 to 742.5%5%
75 to 793%6%
80 to 843.5%7%
85 to 894.5%9%
90 to 945.5%11%
95 or more7%14%

Payments must be received at least annually between 1 July and 30 June each financial year, although many retirees opt to receive monthly or quarterly payments. Annual payment amounts are rounded to the nearest ten whole dollars. If the amount ends in an exact five dollars, it is rounded up to the next whole ten dollars.

Learn more about planning your account-based pension withdrawalsfor the new financial year.

Case study

Mike is a 66-year-old retiree with $500,000 in a super account-based pension within his SMSF on1 July 2022.

Following the temporary reduction in minimum drawdown rates, Mike isonly required to withdraw 2.5% of his account balance, that’s $12,500 by 30 June 2023.

On 1 July 2023 the balance of Mike’s super pension is still $500,000 after drawdowns and investment earnings. During 2023–24, Mike is required to draw down 5% of his account balance, which is $25,000 instead of $12,500 the previous year.

Minimum pension payment calculator

Our calculator below estimatesyour minimum pension payment amount.

(Video) BGL & Heffron: SMSFs - Latest strategies and tips | Live webinar (April 2023)

Enter your age and pension balance in the yellow fields as at 1 July and the calculator will display your annual minimum pension payment amount for that financial year (1 July to 30 June).

Disclaimer: The results of this calculator are indicative only and do not constitute financial advice. We recommend that you check your minimum pension payment amounts with your financial adviser, accountant or the ATO.

Pension planning tips and strategies

If you have been drawing the minimum pension payments prior to 1 July 2023, you will need to ensure you have sufficient cash flow to support higher minimum payments in 2023–24. If not, you may need to review your investment strategy and allocate more assets to short-term cash investments.

Some retirees may find the new minimum pension payment is more than they need. If so, you have options.

  • If you are under 75, you could reinvest payments you don’t need in an accumulation account. If your total super balance is under the transfer balance cap (currently $1.7 million and increasing to $1.9 million from 1 July 2023), you can make non-concessional contributions until you turn 75. There is no longer any need to meet a work test to make this type of contribution.
  • If you can’t make super contributions but want to keep money in super, you could consider commuting (ceasing) your pension, transferring your pension balance to the accumulation phase and starting a new pension with a lower balance. A pension with a lower balance also has a lower minimum withdrawal.

Read more about your total super balance and transfer balance cap.

Lastly, don’t feel you have to set your pension payment strategy in stone on July 1 when the new year’s minimum is calculated. You can change the amount of your payment during the financial year, provided you meet the minimum annual withdrawal requirements.

(Video) Webinar - 2022-09 - Understanding the difference in SMSF pension documents

What if I don’t withdraw the minimum pension amount?

Minimum pension withdrawalsare mandated by the government. If you fail to comply, your super pension could lose its tax-free status.

SMSF trustees need to be vigilant and arrange for the minimum pension payment to be made each year. As the minimum annual drawdowns revert to normal in 2023–24, it’s crucial to check you are meeting the minimum requirements when you set your pension payments at the start of the new financial year.

Does the minimum drawdown affect my Age Pension?

The amount of Age Pension you receive is determined by theincome testandassets test.

The income test is not affected by the amount you withdraw from your super pension,as Centrelink applies the deeming rules to estimate your super pension income.

However, the assets test includes your total super balance and assets outside super. This presents an opportunity for retirees whose assets are only slightly above the Age Pension threshold, asthe more you withdraw from your super the more Age Pension you may be entitled toreceive.

Learn more about thedeeming rulesandhow your super can affect the Age Pension.

Why does the government set a minimum payment?

The reason for setting minimum annual payments is to satisfy the sole purpose test. That is, that super(and the generous tax concessions it receives)is designed to provide retirement income and for your balances to eventually run out. It’s not designed as a tax-effective way to transfer wealth to the next generation.

The percentage factor – normally beginning at 4% and rising to 14% as you age – is generally considered a safe amount for retirees to withdraw annually while maintaining an account balance that will keep the income flowing through retirement. As it’s impossible to know how long any individual will live, these amounts are based on the average lifespan for Australians who reach age 65, 75, 80, 85, 90 and 95.

Your super income stream will stop:

  • When there’s no money left in the account
  • If the minimum, annual payment is not made
  • If it is commuted (converted) into a lump sum
  • When you die, unless you have a dependent beneficiary who is automatically entitled to receive the income stream, referred to as a reversionary beneficiary.

There is no maximum annual drawdown other than the balance of your account, unless it is aTransition-to-Retirement (TTR) Pensionthat is not in retirement phase, in which case the maximum amount is 10% of your pension account balance.

Calculating the first payment

If you start an account-based super pension after 1 July, the minimum amount for the first year is calculated on a pro-rata basis according to the number of days remaining in the financial year, including the start day (see example below).

(Video) Explain the minimum pension payments from superannuation

If your super pension commences on or after 1 June, no payment is required in that first financial year.


Heather, 64, has an account-based pension within her SMSF with a balance of $643,000. As this is the first year of her pension, which she started on 1 March 2023, this is how the minimum amount is calculated for the first financial year.

There are 122 days left in the financial year, from 1 March to 30 June, so the minimum withdrawal in the first year is $4,300 rounded to the nearest ten dollars, calculated as follows:

122 days is 33.4% of 365 days

$643,000 x 33.4% = $214,762

$214,762x 2% = $4,295.24, rounded to $4,300.00 (instead of $8,590.00 under the usual4%drawdown)

Heather opts to receive the minimum amount in three monthly payments of $1,433.33.

The bottom line

The government’s temporary halving of the minimum pension drawdown rates gaveretirees with account-based super pensions more flexibility in the management of their pension assets while investment markets werevolatile.

The return to normal minimum pension drawdown rates in 2023–24 may require some SMSF trustees with pension accounts to adjust their cashflow planning and retirement income strategy. Retirees affected by this adjustment may benefit from seeking independent financial advice to determine the best pension strategy for their circumstances.

(Video) Multiple pension strategy


How do you calculate the minimum pension payment? ›

To calculate the minimum payment amount, multiply the minimum annual payment amount by the remaining number of days in the financial year and divide by 365 (or 366 in a leap year). This is expressed as: Minimum payment amount = minimum annual payment amount × (remaining number of days ÷ 365 (or 366)).

What is the maximum drawdown for TTR? ›

There is no maximum annual drawdown other than the balance of your account, unless it is a Transition-to-Retirement (TTR) Pension that is not in retirement phase, in which case the maximum amount is 10% of your pension account balance.

What happens if you don't meet minimum pension? ›

It is not enough for the pension rules to state a payment will be made each year if a payment is not actually made in that year. If you do not make the minimum payment in an income year, the pension will be treated as having ceased at the start of that income year for tax purposes unless the exception applies.

What are the benefits of SMSF in pension phase? ›

Tax strategies

Like all super funds, SMSFs benefit from concessional tax rates. In the accumulation phase, tax on investment income is capped at 15 per cent; in the pension phase there is no tax payable, not even capital gains tax.

What is the formula for calculating pension? ›

The formula for calculating EPF higher pension is as follows: Monthly pension amount = (Pensionable salary X pensionable service)/70. The EPF will soon issue a circular showing the mode of calculating higher pensions.

What is the formula how do you calculate pension? ›

If you don't opt for the higher pension: The EPS pension is calculated on the average of 60 months' average pensionable salary at the time of retirement. For example, if you joined EPS at the age of 25 and retired at age of 58 then you may get Rs 7071 as a monthly pension [(Rs 15000×33)/70].

What is the difference between a TTR and account based pension? ›

An account based pension is generally designed for individuals who have retired from the workforce, yet can remain an option in some circumstances for those still working. A transition to retirement pension is for individuals who are still working and have not yet retired.

What is a good max drawdown value? ›

However, it is always recommended for investors and traders that drawdown should be kept below the 20% level. By setting a 20% maximum drawdown level, investors can trade with peace of mind and always make meaningful decisions in the market that will, in the long run, protect their capital.

What is a TTR pension strategy? ›

A TTR strategy is where you start receiving payments from your super while you're still working – giving you flexibility, without reducing your income. With most super funds you can do this by opening an account-based pension, such as QSuper's Transition to Retirement Income account.

What is considered a small pension amount? ›

Definition of small pension

The commuted value of the pension is less than or equal to 20% of the Year's Maximum Pensionable Earnings in the calendar year that the commuted value was most recently determined.

What is the 1 12th rule on SMSF? ›

What is a small underpayment? A small underpayment is one that does not exceed one-twelfth of the minimum pension payment in the income year. For super income streams that commence part-way through the year, a small underpayment is one-twelfth of the minimum annual pension payment amount and not the pro-rated amount.

Does Lump Sum count towards minimum pension? ›

Annual Minimum Pension Requirement

Only Pension withdrawals count towards the minimum pension requirement while Lump Sum withdrawals cannot be used to meet the minimum pension requirement.

What are the pros and cons of SMSF? ›

The advantages and disadvantages of a self-managed super fund
  • The Advantages of a Self-Managed Super Fund.
  • Investment Choice.
  • You Have Total Control.
  • Flexibility and Agility.
  • Accountability.
  • The Disadvantages of a Self-Managed Super Fund.
  • You Require Legal and Financial Knowledge.
  • It's Time Consuming.

What happens to my SMSF when I retire? ›

If you are aged between 60 and 64 your Super Benefit is preserved until your "Retirement". There are absolutely no restrictions to accessing your Super Benefit when aged between 60 and 64 after you are "Retired". In this case your Super Benefit can be accessed as either a Pension or Lump Sum withdrawal.

What is the maximum withdrawal from SMSF pension phase? ›

There is no maximum Pension Withdrawal that you can take for a Simple Account Based Pension. There is a maximum Pension Withdrawal amount of 10% of your Pension Balance for a TRIS.

What is the average pension payout per month? ›

Average Monthly Retirement Income

According to data from the BLS, average incomes in 2021 after taxes were as follows for older households: 65-74 years: $59,872 per year or $4,989 per month.

How much is a $30000 pension worth? ›

As an example, examine how much an earned pension income of $30,000 would add to a person's net worth. A defined benefit plan income of $30,000 annually is $2,500 per month, which is 25 times $100.

How do I calculate my monthly pension payout? ›

However, most will use the average of your three highest years of compensation as a start for your payout calculations. Once this number is clear, it's multiplied by the percentage factor for your plan. You then multiply the subsequent number by the amount of years you were employed at the company.

Is there a retirement calculator? ›

NerdWallet's Social Security calculator can help you estimate your benefits. It's important to consider how your expenses will change in retirement.

What is a lump sum pension payout? ›

A lump-sum distribution is the distribution or payment within a single tax year of a plan participant's entire balance from all of the employer's qualified plans of one kind (for example, pension, profit-sharing, or stock bonus plans).

How do you analyze pension options? ›

Here's How to Analyze a Pension
  1. Understand your options. Pension payout options can vary from plan to plan, though most have the same core options, there are variations. ...
  2. Understand the pros and cons of each pension income choice.
  3. A Word on Pension Maximization.
Oct 15, 2019

What is the alternative to account based pension? ›

Annuities. Non-account-based pensions are more commonly called “annuities”. With this product, you use your retirement benefit funds to purchase a non-account-based pension from a provider; in return, you receive a guaranteed, regular payment.

What are the benefits of account based pension? ›

The main benefit of choosing an account-based pension relates to the tax savings. An account-based pension can be more tax-effective than taking your super as a lump sum. The earnings from investments in your account are tax-free. These tax-free earnings remain in your account and increase the account balance.

What is a simple account based pension? ›

Simple Account Based Pension (SABP) A Simple Account Based Pension is an income stream that you receive from your SMSF when you reach age 65 or alternatively when you are aged between preservation age and 64 and "Retired".

What percentage is safe to drawdown? ›

Our research1 shows that a potentially sustainable rate is to withdraw between 4% and 5% of your household retirement savings in the first year of your retirement – and then adjust that amount every year for inflation. However, it's important to remember that this is just a rule of thumb.

What percentage should I take in drawdown? ›

How much should I drawdown from my pension? Experts recommend sticking to the safe withdrawal rate. It's recommended that you don't take more than 4% of your pension pot in 1 year. In theory, this leaves enough of your pension invested that the growth of your investment over time should cover any withdrawals you make.

What is a good return to drawdown? ›

In practice, investors want to see maximum drawdowns that are half the annual portfolio return or less. That means if the maximum drawdown is 10% over a given period, investors want a return of 20% (RoMaD = 2). So the larger a fund's drawdowns, the higher the expectation for returns.

What are the disadvantages of transition to retirement? ›

Disadvantages of a TTR strategy

With a TTR you must withdraw at least 4% of the balance of your TTR account and can access a maximum of 10%. These restrictions mean that you need to consider how much of your super you transfer into a TTR account when you open it. You cannot withdraw a lump sum.

What are the three most common pension plans? ›

Defined benefit pension plans can be further subdivided into three types: single employer, agent multiemployer, and cost-sharing multiplier.

What are the best retirement portfolio allocations? ›

So, What is the Best Asset Allocation in Retirement?
  • Start by Considering Your Monthly Expenses.
  • Then, Consider How Much You Have Saved Already.
  • Figure Out Cash Needs First (5-30% allocation)
  • Next, Budget for Bonds (35-50%)
  • Distribute the Rest of Your Portfolio into Stocks (20-60%)
Jan 24, 2023

Does a small pension affect Social Security? ›

Pension payments, annuities, and the interest or dividends from your savings and investments are not earnings for Social Security purposes.

How much retirement income is enough? ›

It depends on desired retirement lifestyle, expected retirement age, life expectancy, and current savings. However, a common rule of thumb is to aim to replace 70-80% of pre-retirement income.

What is the 50 unlocking for LRSP? ›

Age 55 and over - One-time 50% unlocking:

they may transfer 50% of the funds in their RLIF into an RRSP or an RRIF. Cash can then be withdrawn, from either of these vehicles, subject to any applicable income tax rules. The funds cannot be taken directly in cash from an RLIF.

What is the minimum balance for SMSF? ›

There is no statutory minimum balance to start an SMSF.

What is the recommended balance for SMSF? ›

There's no minimum balance required to set up an SMSF, but it usually becomes cost-effective once you have a balance of $250,000 or more. You will need to pay the annual supervisory levy to the ATO and arrange for an accountant to prepare the financial statements and tax return, and conduct an independent audit.

Does the 45 day rule apply to SMSF? ›

The 45-Day Rule applies to all SMSF's regardless of the amount of Franking Credits. This means that the $5,000 exemption that applies to individuals does not apply to SMSF's. The holding period rule only needs to be satisfied once for each purchase of shares.

Is it better to take your pension in a lump sum or monthly? ›

A monthly pension payment gives you a fixed amount every month over your whole life, so you don't have to worry about changes in the stock market. In contrast, a lump-sum payout can give you the flexibility of choosing where to invest or save your money, and when and how much to withdraw.

How do I avoid taxes on lump sum pension payout? ›

Investors can avoid taxes on a lump sum pension payout by rolling over the proceeds into an individual retirement account (IRA) or other eligible retirement accounts.

What are the disadvantages of taking lump sum pension? ›

The drawbacks of taking a lump sum

Pension value can decrease: If you choose to withdraw and hold the money in cash, for example in a savings account, the value can decrease in real terms. It can mean your spending power falls, in turn, affecting your retirement lifestyle.

What are the drawbacks of SMSF? ›

Disadvantages of SMSFs
  • Responsibility. All decisions and responsibilities for managing the SMSF rest with the trustee. ...
  • Cost. ...
  • Limited Ability to Diversify. ...
  • Lack of Compensation Scheme.

How much does the average SMSF cost? ›

Table 3: Investment fee range
Fee levelFee
Low0.07% per year
Mid0.47% per year
High1.75% per year
Dec 12, 2022

What can't you do with SMSF? ›

Assets cannot be purchased by an SMSF from its members (or a related party), even if done so at market value. This includes residential properties. The exception to this rule is listed shares, managed funds and commercial property. There is to be NO personal use of SMSF assets by its members or anyone related to them.

What is the average return of SMSF? ›

Super fund performance: Financial years (1992–93 to 2021–22)
Financial yearReturn (%)
26 more rows
Jan 19, 2023

Can I withdraw Lump Sum from SMSF after age 65? ›

You can make Lump Sum withdrawals whenever you like from your SMSF once you turn 65. There is no maximum Lump Sum amount if you are aged over 65 and you are free to access all your Super Benefit as desired. No tax is payable on Lump Sum withdrawals made after 65.

Can I take a lump sum from my SMSF? ›

A self-managed super fund (SMSF) can pay benefits in the form of a lump sum, an income stream (pension) or a combination of both, provided the payment is allowed under super law and the fund's trust deed.

What is the 4 withdrawal rule for retirement? ›

The “4% rule” is a common approach to resolving that. The rule works just like it sounds: Limit annual withdrawals from your retirement accounts to 4% of the total balance in any given year. This means that if you retire with $1 million saved, you'd take out $40,000 the first year.

What is the maximum lump sum you can take from your pension? ›

Take cash lump sums

You can take your whole pension pot as cash straight away if you want to, no matter what size it is. You can also take smaller sums as cash whenever you need to. 25% of your total pension pot will be tax-free. You'll pay tax on the rest as if it were income.

What is the average pension amount per month? ›

Average Monthly Retirement Income

According to data from the BLS, average incomes in 2021 after taxes were as follows for older households: 65-74 years: $59,872 per year or $4,989 per month. 75 and older: $43,217 per year or $3,601 per month.

How do you calculate pension input amount? ›

The pension input amount (PIA) is the monetary amount a members savings have grown by in the pension input period and is calculated by determining the difference between the opening and closing values. The pension input amount is the increase or growth in the value of a member's benefits over the pension input period.

What is a normal pension payment? ›

A regular pension payment is a set monthly payment payable to a retiree for life and, in some cases, for the life of a surviving spouse. Some pensions include cost-of-living adjustments (COLA), meaning payments go up over time, usually indexed to inflation.

What is a decent retirement pension? ›

Generally, a good retirement income is about 75% to 85% of the pre-tax income earned in your last working year.

What is a small pension lump sum? ›

A small pot payment (properly called 'small lump sum') can be made from any arrangement, whether the rights are uncrystallised or comprise a pension in payment, irrespective of the overall value of the individual's pension's worth.

Should I take a lump sum pension or monthly payments? ›

With a lump sum payment, you can leave any assets remaining at the time of your death to your children or other heirs. In contrast, a monthly pension ceases when you or a spouse dies (depending on your plan options—more on this later), meaning you won't be able to leave anything for your heirs.

What is the 6 rule for retirement? ›

Here's how the 6% Rule works: If your monthly pension offer is 6% or more of the lump sum, it might make sense to go with the guaranteed pension. If the number is less than 6%, you could do as well (or better) by choosing the lump sum and investing it.

What is the 6 percent rule for retirement? ›

To get more clarity about your particular situation, think in terms of the 6 percent rule. As a general guide, if your monthly pension check equals 6 percent or more of the lump-sum offer, then you may want to go for the perpetual monthly payment.

Is $4,000 a month a good pension? ›

First, let's look at some statistics to establish a baseline for what a solid retirement looks like: Average monthly retirement income in 2021 for retirees 65 and older was about $4,000 a month, or $48,000 a year; this is a slight decrease from 2020, when it was about $49,000.

Is $6,000 a month a good pension? ›

With $6,000 a month, you have more money than the average retiree—Americans aged 65 and older generally spend roughly $4,000 a month—and therefore more options on where to live. Below, we list five spectacular places where you might consider spending your golden years.

Is 3000 a month a good pension? ›

If you have a low living cost and can supplement your income with a part-time job or a generous pension, then retiring on $3,000 a month is certainly possible. However, if you have a high living cost or rely solely on Social Security benefits, retiring on $3,000 a month may be more difficult.

What is threshold income for pension allowance? ›

In summary "threshold income" is: Taxable income for the tax year less. Any taxable lump sum pension death benefits accruing in the tax year (ITEPA 2003 section 636A-4ZA) plus.

How do you draw on a pension? ›

Take cash lump sums

You can take your whole pension pot as cash straight away if you want to, no matter what size it is. You can also take smaller sums as cash whenever you need to. 25% of your total pension pot will be tax-free. You'll pay tax on the rest as if it were income.

What is the pension input period? ›

A 'pension input period' (PIP) is a period of time over which the pension input amount under an arrangement is measured so that a check can be made to see if the Annual Allowance for the related tax year has been exceeded.


1. Acis 2018 SMSF Update: New regime, new strategy
2. Webinar - 2022-02 - Risks in managing SMSF pensions
3. Investment strategies & pensions | Live webinar | November 2021
(BGL Corporate Solutions)
4. Acis 2018 SMSF Update: New regime, new strategy Extended Version
5. Self Managed Super Funds (SMSFs) EXPLAINED
(Davie Mach)
6. Accessing Superannuation After Retirement: What Are Your Options?
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