Pension Income Sustainability Calculator
Projected Pension Duration
Key Takeaways
- Australian "pension income" can mean the government Age Pension or withdrawals from your superannuation.
- The Age Pension is generally available for life, but it can be reduced or stopped if your means or assets change.
- Super‑based income streams (account‑based pensions) are flexible but not guaranteed for life; they can run out if you withdraw too much.
- Lifetime annuities provide a guaranteed income for life, but they trade flexibility for certainty.
- Regularly review your assets, residency, and drawdown rates to keep your income flowing.
What "pension income" actually means in Australia
When Australians talk about pension income, they are usually referring to one of two things:
Age Pension is a means‑tested, non‑contributory benefit paid by the Australian Government to eligible seniors who have reached the age‑plus‑service requirement. It is intended to cover basic living costs and is paid monthly for as long as you meet the eligibility tests.
Superannuation income stream is a regular payment you receive after retirement from your accumulated super fund, usually set up as an account‑based pension. You control how much you withdraw (subject to minimum drawdown rules), and the fund earns investment returns on the remaining balance.
Both are called "pension income" in everyday language, but they work very differently. Understanding those differences is the first step in answering the question: will the money keep coming?
Is pension income paid for life?
Short answer: not always. The answer depends on which stream you’re looking at and whether certain tests stay stable.
Age Pension - generally for life, but not immune
The Age Pension is designed to last your whole lifetime. As long as you remain an Australian resident, meet the age requirement (currently 66½, rising to 67 in 2027), and pass the means and assets tests, the payment continues month after month.
However, the payment can be reduced or stopped if:
- Your means test shows you have too much income from other sources (e.g., rental income, part‑time work).
- Your assets test exceeds the threshold (currently around $600,000 for a single homeowner).
- You move overseas for more than six weeks in a year - the Age Pension stops for non‑residents.
- You get divorced and the payment is transferred to a former spouse as part of a property settlement.
In each case the Department of Human Services will recalculate your entitlement, and the payment may drop or terminate.
Superannuation income streams - flexibility with risk
Account‑based pensions let you draw as much or as little as you like (subject to a minimum of 4% of the account balance for those aged 65+). Because the balance is invested, strong market returns can keep the money flowing for decades. But the opposite is also true:
- If you withdraw too high a percentage, the capital erodes and you could run out before you die.
- Poor investment performance, especially during early retirement, can shrink the pool dramatically.
Unlike the Age Pension, there’s no safety net if the balance hits zero - the income stream ends.
Lifetime annuities - guaranteed for life, but less flexible
A lifetime annuity is a product you buy with a lump sum of super. In return, an insurance company promises a fixed (or inflation‑linked) payment for the rest of your life.
The guarantee is absolute: even if you live to 100, the payments keep coming. The trade‑off is that you can’t change the amount, and you lose any upside from market growth. Many retirees pair a small annuity with a larger, flexible account‑based pension to balance certainty and control.
Factors that can cut or reduce your pension income
Even when you think you have a “forever” income, life changes can intervene. Keep an eye on these five triggers:
- Means test shifts: A new rental property, unexpected inheritance, or a part‑time job can push income over the test limit.
- Asset accumulation: Buying a second home, increasing super contributions, or a rise in investment value may breach the assets threshold.
- Residency changes: Spending long periods overseas, even for travelling, can suspend the Age Pension.
- Failure to meet drawdown rules: If you miss the minimum 4% drawdown for a year, the government can suspend your super pension until you catch up.
- Health and care costs: Some care fees are counted as income, reducing the Age Pension, while long‑term care can also force you to sell assets that were supporting your income.
Regularly running a simple spreadsheet or using the Department of Human Services’ online calculator helps you spot a breach before it happens.
How to protect your pension income for the long haul
There’s no magic button, but a few practical steps can keep the cash flowing:
- Combine products: Use a small lifetime annuity for essential bills and a larger account‑based pension for discretionary spending.
- Stay under the assets threshold: Keep your main residence exempt (if you own it) and consider holding investment assets in a family trust to reduce assessable wealth.
- Monitor income sources: If you take a part‑time job, calculate the impact on the means test before you start.
- Review drawdown rates annually: Adjust withdrawals if your balance falls below the 20‑year sustainability rule (roughly 5%‑6% of the initial balance).
- Seek professional advice: A qualified financial planner can model scenarios and recommend the right mix of annuity and flexible pension.
Account‑Based Pension vs Lifetime Annuity - Quick Comparison
| Feature | Account‑Based Pension | Lifetime Annuity |
|---|---|---|
| Guarantee | Payments continue as long as the account has money; balance can deplete. | Payments guaranteed for life, regardless of market performance. |
| Flexibility | Withdraw any amount (subject to minimum) and can change investment options. | Fixed payment amount; cannot increase or decrease. |
| Inflation protection | Depends on chosen investment mix; may need to allocate to inflation‑linked assets. | Often available as an option (inflation‑linked annuity) at higher cost. |
| Fees | Management fees, administration charges, and possible investment fees. | One‑off cost plus insurer’s margin; no ongoing fund fees. |
| Estate value | Remaining balance can be passed to beneficiaries after death. | Usually no residual value; payments cease on death. |
Checklist: Keep Your Pension Income Flowing
- ✅ Verify Age Pension eligibility each year via the Online Services portal.
- ✅ Record all income streams (rental, work, dividends) and compare against means‑test limits.
- ✅ Keep total assessable assets below the current threshold - consider the value of your primary residence.
- ✅ Set a sustainable drawdown rate (4‑5% of initial balance) and review annually.
- ✅ If you own a lump sum, get quotes for a lifetime annuity and decide what portion to annuitise.
- ✅ Review your super fund’s investment strategy - aim for a balanced mix that provides growth and income.
- ✅ Speak with a licensed financial adviser every 2‑3 years or after any major life event (marriage, sale of property, health change).
Frequently Asked Questions
Will the Age Pension stop if I start a part‑time job?
Yes, any earned income counts toward the means test. If your weekly earnings push your total income over the test limit, the Age Pension payment will be reduced or halted until the earnings cease or drop below the threshold.
Can I convert my super balance into a lifetime annuity after I turn 65?
Absolutely. Once you meet the Age Pension eligibility age, you can roll a portion of your super into a lifetime annuity. The funds used for the annuity are then locked in, and you receive a fixed (or inflation‑linked) payment for as long as you live.
What happens to my account‑based pension if my super balance falls to zero?
Payments stop. The account‑based pension is only as long as the underlying balance lasts. That’s why many retirees keep a buffer or combine the product with a lifetime annuity.
Do I need to reapply for the Age Pension each year?
No, the Department of Human Services monitors most cases automatically, but you must report any change in income, assets, or residency within 28 days. Failure to do so can lead to over‑payments that you’ll need to repay.
Is my superannuation still protected if I move overseas permanently?
Your super balance remains yours, but you can’t start a new account‑based pension while you’re a non‑resident. You can keep the money invested, but the Age Pension will stop, and any withdrawals may be taxed differently.
