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.

Centrelink applies both tests. The test that produces the lower Age Pension entitlement generally determines how much you receive.

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

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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, super held in accumulation phase is generally not assessed while it is not paying you a pension.

An account based pension can still be assessable before you reach Age Pension age.

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

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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 directly to calculate income test results.

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

Those deemed earnings are counted as assessable income.

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Current deeming rates

From 20 September 2026, the deeming rates are:

• 1.75% at the lower rate
• 3.75% at the higher rate

For a single person receiving a pension, the lower rate applies to the first $66,800 of financial assets.

For a couple where at least one person receives a pension, the lower rate applies to the first $110,600 of combined financial assets.

Amounts above those thresholds are deemed at the higher rate.

Deeming rates and thresholds can change over time.

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Example using deeming

Assume Sophie is single and has:

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

Using the deeming rates from 20 September 2026:

First $66,800 at 1.75%:

$66,800 × 1.75% = $1,169

Remaining $633,200 at 3.75%:

$633,200 × 3.75% = $23,745

Total deemed income:

$1,169 + $23,745 = $24,914 per year

That $24,914 is the amount used for the income test.

Even if Sophie withdraws $60,000 in pension payments during the year, Centrelink does not simply treat that $60,000 as her assessable income.

Her income test assessment is based on deemed income from her financial assets.

This distinction is important.

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Grandfathered pensions

Some account based pensions that commenced before 1 January 2015 may still be assessed under older income test rules.

Starting the pension before 2015 is not enough on its own.

Grandfathering generally also requires the person to have been receiving an eligible income support payment on 31 December 2014 and to have remained continuously entitled to an eligible payment since then.

For qualifying grandfathered pensions:

• 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.

Changing products, or fully commuting and restarting a grandfathered pension, can result in the grandfathering treatment being lost.

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Does taking a lump sum change Centrelink assessment?

It can.

The important question is what happens to the money after it is withdrawn.

For example:

• If you move money from your pension into a bank account, both are generally financial assets. You may simply be moving money from one assessable asset to another.
• If you invest the lump sum in other financial assets, those investments will generally remain assessable and subject to deeming.
• If you spend money on your principal home, the result may be different because the principal home is generally exempt from the assets test.

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

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Minimum withdrawals and Centrelink

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

Because deeming applies to financial asset balances:

• It does not matter whether you withdraw the minimum or more when Centrelink determines income simply by looking at the pension payment itself.

However, what happens to the money after it is withdrawn can matter.

For example, if you withdraw $20,000 from your pension and leave it in a bank account:

• Your pension balance falls by $20,000.
• Your bank balance rises by $20,000.

All else equal, you have generally moved money between two assessable financial assets rather than increasing your total assessable assets by $20,000.

If the money is spent or moved into an exempt asset, the outcome can be different.

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

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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.

If you want help understanding how your account based pension interacts with the Age Pension, learn more about my retirement planning service.

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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 pension withdrawals.

Does withdrawing more increase assessable income?

Not directly. For most post-2015 pensions, Centrelink applies deeming to financial asset balances rather than counting the amount you withdraw as income. What you do with the withdrawn money can still affect future means testing.

Are older pensions treated differently?

Yes. Certain account based pensions commenced before 1 January 2015 may remain grandfathered if the relevant conditions are met, including continuous receipt of an eligible income support payment.

Do minimum pension withdrawals affect the Age Pension?

Minimum withdrawals do not directly increase income test assessments for deemed pensions. If withdrawn money remains in another financial asset such as a bank account, it will generally continue to be assessed.