Summary
Australian retirement income typically pairs the government-funded Age Pension with a private Superannuation Pension. While the Age Pension provides a modest safety net, an Account-Based Pension offers flexibility and tax-free earnings. For greater certainty, Annuities or the Home Equity Access Scheme can supplement your cash flow and protect against longevity risk.
Introduction
Retirement income in Australia can come from a mix of sources. When people say pension, they often mean two very different things, either the government-funded Age Pension or the superannuation pension they start using your own super savings. Understanding how they work (and how they affect each other) helps you avoid rushed decisions, keep tax down, and make your money last.
Some retirees want flexibility and control. Others want certainty and a predictable paycheque. Many people end up using a combination, such as an account-based pension plus a part Age Pension, with a separate plan for later-life stability.
Below is a clear guide to the main options and when each one makes sense.
Age Pension in Australia
The Age Pension is the main government income support payment for people aged 67 or older.
Eligibility
Centrelink looks at your situation under both the income test (opens in a new tab) and the assets test (opens in a new tab). The test that gives the lower pension rate is the one that applies.
Maximum Rates
Services Australia publishes the maximum fortnightly rates (opens in a new tab) (before tax). The figures below match the rates shown on their Age Pension rates page (as of 5 February 2026):
- Single: $1,178.70 per fortnight (about $30,646 per year)
- Couple: $1,777.00 per fortnight (about $46,202 per year)
Rates are indexed twice a year (20 March and 20 September).
Tax
The Age Pension is a taxable payment. Some people pay little or no tax due to offsets and low taxable income, but it depends on your total income across the year.
Account-Based Pension from Super
An account-based pension (opens in a new tab) (also called an allocated pension) is the most common way Australians turn super into retirement income. You transfer some of your super into a pension account, choose how it’s invested, and draw regular payments. The features of super pension are:
- Flexible payments: You choose the payment size and frequency, and you can usually take extra lump sums.
- Not guaranteed: It lasts as long as the money lasts, and the balance moves with investment markets.
- Minimum withdrawals: You must withdraw a minimum percentage each year, based on your age. See the table below.
| Age Group | Minimum Withdrawal Percentage |
|---|---|
| Under 65 | 4% |
| 65–74 | 5% |
| 75–79 | 6% |
| 80–84 | 7% |
| 85–89 | 9% |
| 90–94 | 11% |
| 95+ | 14% |
Tax
From age 60, super pension payments are generally tax-free, and investment earnings in the pension account are generally tax-free.
Transition to Retirement Pension
A Transition to Retirement (TTR) pension is mainly for people who have reached preservation age and are still working. It can help you reduce hours without a sharp drop in income, or use salary sacrifice to build super while keeping cashflow steady.
Payments are income stream payments, not lump sums (non-commutable while you are still working under TTR rules). Withdrawals are limited to 4% minimum and 10% maximum each financial year (based on the account balance).
Annuities
An annuity (opens in a new tab) is a product you buy with a lump sum (from super or other savings) in return for guaranteed income paid for a fixed number of years or for the rest of your life.
Annuities suit people who value income certainty, especially for later-life spending, but they usually involve trade-offs in flexibility and access to capital.
Lifetime Income Streams
Lifetime income streams (opens in a new tab) are designed to pay an income for as long as you live. These may be called:
- a lifetime pension (when bought through a super fund), or
- a lifetime annuity (when bought through a life insurer or friendly society).
Services Australia groups income streams into categories, including asset tested lifetime for certain lifetime products purchased on or after 1 July 2019.
The Department of Social Services sets out the means test approach for asset-tested lifetime income streams. 60% of the purchase amount is assessed as an asset up to a threshold day, then 30% after that.
This is one reason some retirees use a mix of flexible income (account-based pension) plus guaranteed lifetime income for later years.
Home Equity Access Scheme
The Home Equity Access Scheme (HEAS) (opens in a new tab) is a government loan for eligible Australians who are Age Pension age or older, using equity in Australian real estate as security.
It’s a voluntary non-taxable loan. You can receive it as a fortnightly amount, a lump sum advance, or a combination. Interest (3.95% per annum, compounding fortnightly) and a no negative equity guarantee apply.
Comparison of Common Retirement Income Options
| Feature | Age Pension | Account-based pension | Annuity or lifetime income stream | Home Equity Access Scheme |
|---|---|---|---|---|
| Source | Government | Your super | Provider (super fund or insurer) | Government loan |
| Guaranteed income | Yes (while eligible) | No | Yes (term or life) | Not income, loan payments |
| Flexibility | Low | High | Low to medium | Medium (fortnightly or lump sum advance) |
| Tax | Taxable payment | Often tax-free from 60 | Depends on structure and age | Non-taxable loan |
| Centrelink impact | N/A | Can affect eligibility | May have different assessment | Separate rules apply |
Conclusion
A strong retirement plan usually uses more than one lever. The Age Pension can provide a base level of income for eligible retirees. Super pensions can give flexibility and tax advantages. Guaranteed income products can support later-life certainty. HEAS can be a fallback for homeowners who want to stay in their home and improve cashflow.
If you’re in the Sutherland Shire or Sydney CBD and you want help choosing the right mix of pension options, book a 15-minute, no-obligation call (opens in a new tab) with James Hayes. He will map your income options, show how Centrelink and tax interact, and help you avoid decisions that are hard to unwind later.
FAQs
Can I receive the Age Pension and an account-based pension at the same time?
Yes. Many retirees use an account-based pension for flexible income and receive a full or part Age Pension if they qualify. Your account-based pension is counted in Centrelink’s income and assets assessment, which can change the amount you receive.
Is an account-based pension or an annuity better?
They suit different needs. Account-based pensions give flexibility and access to lump sums, but your balance can run down and returns are not guaranteed. Annuities can provide guaranteed income for a fixed term or for life, which can help with budgeting and longevity risk.
How is HEAS different from a reverse mortgage?
HEAS is a government scheme that provides a voluntary, non-taxable loan using home equity as security. It has its own rules, interest rate, and a no negative equity guarantee. A reverse mortgage is a private product, so costs and features vary by lender.