There is a dangerous misconception among self-funded retirees: the belief that once you finish work, your super will automatically switch gears. The reality? Absolutely nothing happens unless you take action.
There is a dangerous misconception among self-funded retirees: the belief that once you finish up at work, your Superannuation will automatically switch gears, and money will just start landing in your bank account.
The Reality?
Absolutely nothing happens.
If you don't sign the paperwork, trigger the switch, and set up your income stream, your money sits there—often in a tax environment that is costing you money.
In this guide, we will cover the rules of access, the tax implications of "Pension Phase," and the strategic moves you can make to ensure your money lasts as long as you do.
Superannuation is "preserved," meaning it is locked away until you meet a Condition of Release ↗. Despite the confusing headlines, there are really only three ages you need to memorize:
Access if you retire (leave a job). Withdrawals become tax-free.
The golden ticket. Full access regardless of work status.
Age Pension age. Centrelink rules kick in.
🔓 UNLOCKED - Full Access
Once you meet a condition of release, you have a massive financial decision to make: Do you start a Pension?
The "Saving" Bucket
The "Spending" Bucket
Imagine Sarah (66) has $800,000 in Super. Her fund earns a 5% return ($40,000) this year.
Sarah saves $6,000 per year just by filling out a form. Read more about this in our Accumulation vs Pension Phase guide.
If you switch to Pension phase to get that 0% tax rate, the government forces you to draw down your balance to ensure it doesn't just become an inheritance tax vehicle.
The minimum amount is calculated on your balance as of July 1st each year. Check the current rates on the ATO website ↗.
Your Mandatory Minimum Annual Withdrawal:
$40,000
If Pension phase is tax-free, why keep money in the taxable Accumulation phase? There are specific strategic reasons:
Your fund might have life insurance premiums or interest on investment loans. You need taxable income in the fund to offset these tax deductions.
Super in Accumulation phase is exempt from the Centrelink Assets Test ↗ if the account holder is under Age Pension age (67).
Example: John (69) wants the Age Pension, but the couple has too many assets. His wife Jane is 62. If they keep a large chunk of money in Jane's Accumulation account, Centrelink ignores it for John's assessment, potentially unlocking thousands in pension payments for him.
You simply don't need the money yet and don't want to be forced to withdraw 5% a year.
A common question is: "Should I move all my investments to cash/bonds when I retire?"
Retirement can last 30 years. If you move entirely to cash, inflation will eat your purchasing power. Your investment strategy should be based on your emotional comfort with volatility and your income needs, not just your birthday. Learn more about investing on Moneysmart ↗.
Your money is estimated to last:
~23 years
If you retire at 65, funds may last until age 88
Retirement is not a set-and-forget event. Whether it is deciding between a Lump Sum or an Account-Based Pension, or managing the interactions between your Super and Centrelink, the decisions you make at the start can determine your lifestyle for the next two decades.
Don't wait for your Super fund to call you—they won't. Take control, run the numbers, and if in doubt, seek professional advice.
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