Confused about the Age Pension vs retirement pension accounts? Learn the key differences, eligibility rules, and how they impact your retirement income strategy.

Navigating retirement income in Australia can be complex, especially when it comes to understanding the difference between the Age Pension and a retirement pension account.

While both provide financial support in retirement, they operate under different systems, with distinct eligibility rules and implications for your overall income strategy.

Understanding the Age Pension in Australia

The Age Pension is a government-funded payment designed to support older Australians who meet specific criteria. Managed by Centrelink, it’s available to individuals who:

• Are aged 67 or older (as of 2025)
• Meet residency requirements
• Pass income and assets tests

The Age Pension acts as a safety net for those with limited retirement savings and is paid fortnightly. Eligibility is reassessed regularly, and your financial situation - including income from other sources - can affect how much you receive.

What is a retirement pension account?

A retirement pension account allows retirees to draw regular income from their accumulated super savings. The most common one is known as an account-based pension. This is not a government payment—it’s managed by your super fund and offers flexibility in how much and how often you withdraw funds.

To access a retirement pension, you must:

• Reach your preservation age (age 60)
• Meet a condition of release, such as retirement or reaching age 65 (even if you haven’t retired)

Unlike the Age Pension, there are minimum withdrawal requirements set by law, but you can tailor your payments to suit your lifestyle and financial needs.

Key Benefits of a Retirement Pension account

Tax-Free Investment Earnings

Once you move your super into a pension phase account, the investment earnings—like interest, dividends, and capital gains—are generally tax-free. That means more of your money stays invested and working for you.

Flexible Income Access

You’re in control. Choose how much and how often you’d like to receive payments, whether it’s monthly, quarterly, or annually. It’s designed to fit your lifestyle and cash flow needs in retirement.

Keep Growing Your Retirement Savings

Even while you’re drawing an income, your remaining balance stays invested. This gives your money the potential to continue growing, helping your retirement savings last longer.

Key Differences Between Age Pension and Retirement Pension

Understanding the difference between Age Pension and the retirement pension through your super is crucial for effective retirement planning:

How Your Retirement Pension Can Affect Age Pension Entitlements

Drawing income from your super can impact your Age Pension eligibility due to the pension income and assets tests. Centrelink assesses your total financial situation, including:

• The balance of your retirement pension account
• Apply an income assessment
• Other assets and investments

This means that even if you qualify for the Age Pension, your payments may be reduced depending on how much you have held in your retirement pension. Centrelink provides additional information on the treatment of income streams.

Planning Your Retirement Income Strategy

Combining both the Age Pension and a retirement pension can be part of a smart retirement planning strategy. Many Australians use their super to supplement the Age Pension, ensuring a more comfortable lifestyle.

If you're considering a transition to retirement pension, or you're unsure how your choices affect your entitlements, it’s wise to speak with a Financial Planner or use tools like Centrelink’s Income and Assets Calculator.

Final Thoughts

Retirement should be a time to enjoy life, not stress over finances. By understanding the roles of the Age Pension and retirement pension accounts, you can make informed decisions that support your goals and lifestyle.

The information in this article is current as at July 2025 and may be subject to change.

This article is issued by Bridges Financial Services Pty Ltd ABN 60 003 474 977 | AFSL 240837. ASX Participant.  Part of the Insignia Financial Group.  The information in this article is of a general nature only and does not take into account your financial situation, needs and objectives. Before making any decision based on this information, you should consider the appropriateness of the information having regard to your own circumstances or seek advice from a Financial Planner and seek tax advice from a registered tax agent. Information reflects our understanding of existing legislation, proposed legislation, rulings etc as at July 2025, and may be subject to change. While it is believed the information is accurate and reliable, this is not guaranteed in any way. Whilst care has been taken in preparing the content, no liability is accepted for any errors or omissions in this article, and/or losses or liabilities arising from any reliance on this article.