About super pensions
A super pension provides a series of regular payments and is payable from a super fund. Only super monies can be used to purchase a super pension.
Super pensions can be payable for a lifetime, for a fixed term or until the super pension account balance runs out. Payments are made periodically, for example, monthly, quarterly, half yearly or yearly.
Some super pensions are purchased for the purpose of providing regular income in retirement or for the purpose of supplementing one’s income whilst transitioning to retirement.
All income and investment earnings from super pensions paid from a taxed fund are tax free for over 60's, so pensions are a very tax-effective way to provide you with an income in retirement. Under age 60 years, the taxable component of the pension payment will be taxed.
Super pensions
Account-based pensions are the most flexible type of super pensions. Where investment choice is provided, you can choose how your account balance is invested. In addition, you can choose how much money you draw down, provided you draw down at least the minimum annual amount and do not exceed the maximum annual amount (applies only to working income support or transition to retirement pensions).
Your account balance will increase or decrease as investment earnings (positive or negative) are added to your account and decrease as you draw down regular pension payments and make lump sum withdrawals (where permitted by super law).
The duration of pension payments, however, is not guaranteed. Your pension payments will only last as long as your account balance is not exhausted. Your account balance is affected, amongst other things, by withdrawals, fees and investment earnings.
Both the Maritime Super Allocated Pension and Working Income Support Pension (WISP) on offer are account-based pensions.
Non-account based pensions
Non-account based pensions do not have an account balance. Instead, you exchange a lump sum of super money to purchase this pension. A non-account based pension is payable either for a fixed term or for your lifetime and payments are guaranteed to be payable by the organisation providing the product.
Commonly known non-account based pensions are lifetime and fixed-term pensions.
Whilst these type of pensions are not as flexible as account-based pensions, you do not have to worry about investment returns and making an investment choice.