Super or Pension – what’s the difference?

When you retire, you have several options to manage your nest egg.

After many years of working – it’s time to enjoy the nest egg you’ve been building. But do you keep your super or turn it into a regular income?

Did you know superannuation has two phases? An accumulation phase and a retirement phase. During accumulation phase, you and your employers put money into your super account throughout your working life. Later, once you reach a certain age (and meet other eligibility criteria), you can choose to move your super into retirement phase, where you can access (or drawdown) money from your super. In some circumstances, you can withdraw your super without moving into retirement phase. Learn more about accessing your super.

So, when you’ve retired, you have a couple of options when it comes to what kind of account you want to invest your super in for retirement.

Super vs retirement income (pension) accounts – how does it work?

A pension generally works much the same way as your super account, except you can’t add money to a pension account once it’s been opened. A pension can be an easy, tax effective way of getting regular income throughout retirement.

Account-based pensions are the most common type of super pensions. Many people choose an account-based pension, also known as an account-based income stream or allocated pension because they offer flexibility and tax concessions.

Once you’ve opened a pension account (by moving your super into a different account), you can choose your investment options and instead of adding money to your account, you’ll receive regular income payments which you can access at any time. It allows you to receive a regular income from your retirement savings (your super), or take out larger sums of money, if you need. You can also set the amount of money you’d like to receive (subject to some government limits) and how often you get paid. Your money will then go into the bank account of your choice – just like your pay.

An account-based pension is generally designed for people who’ve retired from the workforce, yet it could be a tax-effective option for those still working (in some circumstances). Consider talking to UniSuper’s award-winning advice team to help plan your ideal retirement.

There’s also a type of pension called a lifetime income stream.

What’s the difference between a lifetime income stream and an account-based pension?

With an account-based pension, your money is allocated to chosen investment options with a view to accumulating positive returns over time—ideally meaning more savings for retirement, though this isn’t guaranteed.

A lifetime income stream (such as our Lifetime Income account or Defined Benefit Indexed Pension) can give you the security of a regular income for the rest of your life, and the life of your spouse (if applicable), no matter how long you live. They vary depending on the provider. Investment performance generally doesn't affect lifetime income streams which makes them a more stable option. The income you receive is indexed in line with CPI.

Lifetime income streams can complement other retirement income products you may have, such as an account-based pension, where the balance may run out while you’re alive.

Lifetime income streams that meet the relevant legislative requirements can receive favourable treatment under the income and assets tests used by Centrelink. UniSuper offers both account based and lifetime income streams. Learn more about UniSuper’s pension options.


Depending on what you choose to do with your money (whether you keep it in a super account or start a pension account – or both?) you will likely have investment options.

Most account-based pension accounts provide a level of investment choice, similar to your super account. If you’re already a UniSuper member and use (some or all) your balance to start a Flexi Pension account, you can invest it in the same range of investment options you’re already familiar with. If you’re new to UniSuper and want to start a Flexi Pension, you’ll be able to choose from our range of 16 investment options.

With a lifetime income account on the other hand (such as our Lifetime Income account and Defined Benefit Indexed Pension), there is no investment choice. You’re paid a regular income for life, regardless of how long you live or how investment markets perform.


Superannuation, like many things, is taxed in Australia. However, the government offers tax concessions on super contributions and investment earnings in certain circumstances to encourage people to retire with more money.

Did you know that once you turn 60, any withdrawals you make from your super are tax-free? You might still pay tax on your investment earnings depending on the account your super is invested in. While your money is in super, your investment earnings are taxed at 15%, at any age.

Super is generally taxed at four stages:

  • when contributions enter your account
  • on your super investment earnings
  • when you withdraw your super
  • when you die (super death benefit).

Account based pensions may be tax-effective because:

  • Income paid to you from age 60 is generally not taxable (from a taxed fund).
  • Taxable pension income paid to you between your preservation age and age 60, or due to permanent disability, is eligible for a 15% tax offset (from a taxed fund).
  • Within a retirement phase pension account, all earnings and capital gains from investments are tax exempt. This can boost the effective returns compared to other similar investments you may own personally.

Lifetime income streams

If you purchase a lifetime income stream such as our Lifetime Income account and Defined Benefit Indexed Pension, and you’re aged 60 or over, the regular payments are tax free up to the Defined benefit income cap. If you’re under age 60, payments may include a portion which will be taxed at your marginal tax rate, but you’ll receive a 15% tax offset.

Learn more about tax and UniSuper pensions.

Need help with next steps?

Planning a retirement strategy and understanding potential tax implications isn’t always straightforward, so we recommend you speak to a qualified financial adviser. Our award-winning advice team can help—call us or talk to one of our financial advisers.

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Where will your income come from in retirement?
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When to consider retirement?
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The information is of a general nature and doesn't consider your personal circumstances. Before making decisions, you should consider whether the information is appropriate for your circumstances otherwise seek financial advice.
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