How an Account Based Pension Affects the Age Pension

An account based pension can affect your Age Pension under both:

• The assets test
• The income test

Most modern pensions are assessed under deeming rules.

The details matter.

If you need a refresher on how account based pensions work generally, start here:
Account Based Pensions Explained

---

Assets test treatment

For Age Pension purposes, the account balance of your account based pension is generally assessed as a financial asset.

That means:

• The full account balance counts toward your assessable assets.
• It is included alongside other financial investments.

If you are under Age Pension age, your super in accumulation phase is generally not assessed.

Once you reach Age Pension age, super in both accumulation and pension phase is generally assessed.

---

Income test treatment

This is where confusion often arises.

For most account based pensions commenced on or after 1 January 2015:

• The pension balance is treated as a financial asset.
• That financial asset is subject to deeming.
• Actual withdrawals are not used to calculate income test results.

Deeming means Centrelink assumes your financial assets earn income at set deeming rates.

Those deemed earnings are counted as assessable income.

---

Example using deeming

Assume Sophie has:

• $700,000 in an account based pension
• No other financial investments

Centrelink applies:

• A lower deeming rate to assets below the threshold
• A higher deeming rate above that threshold

If deemed income calculated across both rates equals, for example, $18,000 per year, that $18,000 is used for the income test.

Even if Sophie withdraws $60,000 in pension payments, her assessable income is based on deemed income, not the $60,000.

This distinction is critical.

---

Grandfathered pensions

Account based pensions that commenced before 1 January 2015 may be assessed differently if they qualified for grandfathering.

In those cases:

• The deductible amount method may apply.
• Assessable income may be calculated as pension payments less a deductible portion.

These arrangements are complex and fact specific.

Not all older pensions are grandfathered.

---

Does taking a lump sum change Centrelink assessment?

It can.

If you withdraw a lump sum and:

• Spend it on exempt assets, assessment may reduce.
• Invest it in financial assets, deeming will apply.

The structure of where the money sits determines the outcome.

For a broader comparison between pension and lump sum strategies, see:
Account Based Pension vs Lump Sum

---

Minimum withdrawals and Centrelink

Minimum pension withdrawals do not directly increase income test assessments for most modern pensions.

Because deeming applies to the balance:

• It does not matter whether you withdraw the minimum or more.

However, if you withdraw funds and retain them in assessable assets such as bank accounts, that may increase your assessable assets.

The withdrawal itself is not the driver. Where the money sits is.

For minimum withdrawal mechanics, see:
Account Based Pension Minimum Drawdown Rates

---

Why this matters

Age Pension entitlements are sensitive to:

• Asset levels
• Deemed income
• Relationship status
• Legislative thresholds

Small structural changes can alter outcomes.

This is an area where technical detail matters.

---

FAQs

Is an account based pension counted as an asset for the Age Pension?

Yes. The account balance of an account based pension is generally assessed under the Age Pension assets test.

How is an account based pension assessed under the income test?

Most account based pensions commenced on or after 1 January 2015 are assessed under deeming rules. Centrelink applies deeming rates to the pension balance rather than using actual withdrawals.

Does withdrawing more increase assessable income?

No. For most post-2015 pensions, Centrelink applies deeming rates to the account balance. Actual pension withdrawals do not increase assessable income under the income test.

Are older pensions treated differently?

Yes. Certain account based pensions commenced before 1 January 2015 may be grandfathered and assessed under different income test rules.

Do minimum pension withdrawals affect the Age Pension?

Minimum withdrawals do not directly increase income test assessments for deemed pensions. However, if funds are withdrawn and retained in assessable assets such as bank accounts, this may affect the assets test.