What types of superannuation benefits are there?

There are two types of structures, defined benefit and defined contribution.

Defined benefit

A defined benefit fund defines the benefit at retirement by a formula. For example, the fund will give the retiree (say) 2% of final salary for each year as a member of the fund. So, if they were a member for 50 years, the would enjoy 100% (2% x 50) of final salary. The crucial benefit of these funds is there is no "performance" risk to the retiree. They get the benefit regardless of underlying fund performance. For this reason they are "dying out". They carry far too much risk for the fund.

Defined contribution

A defined contribution fund defines the contribution to the fund. These contributions accumulate within the fund and the final benefit depends entirely on how well the fund has performed. The retiree carries all the risk (and reward). These are by far the most popular funds in Australia.

What categories of super funds are there?

Key statistics for the superannuation industry

Use the calculator on this page for a worked example with current figures.

1. Small funds

(a) Self Managed Superannuation Funds (SMSFs)

An SMSF must have between 1 and 6 members.

An SMSF is predominately for people who want to control their own superannuation. The trustees, who are also members, choose their investments, investment strategy and specialist advisers. They also take on the responsibility of the fund's administration such as maintaining records, financial statements, tax returns and audit.

The sole purpose of an SMSF is to provide retirement benefits for its members. This sounds simple enough but many trustees have floundered on this principle by using their fund as their personal bank account or ignoring their own investment strategy.

Unless members have the expertise to set an investment strategy, choose the investments and do all the administration they will have to buy that expertise or put their retirement funds at risk. Specialists cost money and it is generally accepted that unless an SMSF has at least $250,000 it would not be a cost-effective option.

SMSFs have been an extraordinary success story. In 2004 there were 271,515 funds; as at March 2026 there are 672,805 SMSFs with over 1.2 million members, holding an estimated $1.06 trillion in assets. The most common asset types by value are listed shares (26%) and cash and term deposits (16%). Around 85% of members are aged 45 or older, and the split is 53% male to 47% female.

(b) Small APRA funds

A small APRA fund (SAF) is much like an SMSF but the compliance obligations are passed onto an approved trustee company.

They can be useful for:

• Anyone who wants greater control of their super investments but without the trustee responsibility.
• Families who provide for a relative with an intellectual disability.
• Those moving or living overseas who can no longer be a member of an SMSF.

2. Retail funds

Retail funds are offered by the big institutions like the banks and AMP. They usually offer;

• Investment options. Most offer a wide range of investment options.
• Insurance. Most offer insurance benefits like TPD, Term life and salary continuance.
• Ancillary benefits. Many have ancillary benefits like cheaper home loans, online access etc.
• Financial advisers. Most are recommended by financial advisers who charge for their advice.
• Accumulation funds. They are all accumulation funds. Your contributions accumulate with interest.
• Fees. Retail funds used to be associated with higher fees but this has changed. Some have low cost offerings like MySuper.
• Profit. They are all companies with shareholders and a profit motive that drives their decisions.

3. Industry funds

Industry funds were initially for employees of a certain industry. Today the larger industry funds are open to everyone. They usually offer much the same benefits as retail funds;

• Investment options. Most offer a wide range of investment options.
• Insurance. Most offer insurance benefits like TPD, Term life and salary continuance.
• Accumulation funds. They are all accumulation funds. Your contributions accumulate with interest.
• Fees. Industry funds are associated with lower fees because they don't carry the cost of a financial adviser. They also don't have shareholders and can concentrate on benefits to members.

4. Corporate funds

A corporate fund is a super fund open only to employees of the employer sponsoring the fund. The fund may be controlled by a board of trustees comprising the employer and employees or it could appoint an independent trustee.

Typical features are;

• All profits are given to members. There are no shareholders sharing them.
• A large range of investment options.
• Most are accumulation funds but some may still offer a defined benefit. A defined benefit is usually 'defined' as a percentage of final income (often around 2%) multiplied by years service. So 50 years service means the member will retire on 100% of his or her final salary. This type of fund used to be common but has become a rarity as employers divested themselves of the risk of having to pay these pensions in an aging population.

5. Other funds

5a. MySuper

MySuper is the new default account for employees who don't choose a superannuation fund. This will become their default choice. MySuper is characterised by;

• Lower fees.
• Fewer options.
• Investment options related to 'stage of life'. Usually this means the investment option becomes less risky as the member approaches retirement.
• The ability to opt out of insurance.

5b. Eligible rollover funds

These funds are a holding account for lost or inactive members who have relatively low balances. There is a disparity of costs and returns and so members with low balances could find them decimated by fees and poor returns.

How much investment risk can you take?

Investment risk is the degree to which your investment will experience volatility and how comfortable you are with this. Shares for example are far more volatile than cash or fixed interest and so the greater proportion of shares in your portfolio the more volatile it will be. Volatility can include periods of negative returns which can prove distressing to investors.

Most periods of negative returns are followed by extensive periods of positive growth which more than replaces the amount lost. If however you are forced to withdraw money for living expenses during a time of negative growth your capital may be depleted to a point that you can no longer live off growth alone and will be forced to withdraw from a reducing capital base.

If you have sufficient capital however you can continue to withdraw living expenses during the period of negative growth without reducing your capital to the point it can no longer generate enough income to meet your needs.

Essential questions are;

• What are your goals and objectives?
• What is your time-frame?
• What are your expenses?
• What are your liquidity requirements?
• What are your age?
• What is your ability to withstand periods of low or negative growth?

Types of investment risk

Seven risks that can impact your investment:

• Market risk — a market correction or crash causes your investment to fall in value.
• Interest rate risk — if you hold cash or bonds, a change in rates can cause their value to fall.
• Currency risk — if your investment relies on overseas assets and the dollar weakens.
• Liquidity risk — assets may have to be sold quickly at a low price (a "fire sale").
• Concentration risk — too much in one asset or type of asset, so your risk is not spread.
• Inflation risk — inflation reduces the buying power of your investment over time.
• Credit risk — the borrower behind your investment may not repay what they owe.

Choosing assets

Once you're building wealth inside super, the next question is which assets your fund holds. The skill of choosing good assets — shares, property, ETFs, bonds and the rest — is much the same whether your SMSF buys them or you buy them in your own name. What changes is the tax treatment and the rules.

Inside super, your fund's investment earnings are taxed at 15% (or 0% once in pension phase), and SMSF-specific rules apply: the sole-purpose test, the 5% in-house asset limit, business real property, and — since 2026 — restrictions on borrowing to buy residential property.

Our Choosing assets section covers each asset type in full, with how it's taxed both inside and outside super.

Employer contributions

Superannuation Guarantee

Australian law requires all employers to provide a minimum level of superannuation for their employees. Employer contributions and Superannuation Guarantee (SG) contributions are the same thing — the compulsory amount your employer must pay into your super, currently 12% of your ordinary time earnings. For each quarter of a financial year, an amount equal to the prevailing Superannuation Guarantee (SG) rate of each eligible employee's ordinary time earnings (OTE) must be paid to a complying super fund. Employer contributions include all deductible employer super contributions made by an employer for the benefit of an employee and are taxed at 15%.

The SG payment rate reached 12% on 1 July 2025 — the final step in a series of legislated increases — and remains at 12%. There is no further increase currently scheduled.

Use the employer contributions calculator below for a worked example with current figures.

An employer has to pay the required rate by the quarterly date or be subject to the Superannuation Guarantee Charge (SGC) which is a penalty to the tax office. The SGC includes the SG owing, interest on the outstanding SG and an administration fee.

In most cases the SG is paid into the complying fund chosen by the employee but in some cases it is paid into a fund dictated by a workplace agreement or public sector fund run by state or Federal government. If an employee doesn't specify a fund then the SG will be paid into a default fund with a MySuper option. MySuper is a low cost fund with restricted options.

Employees under age 18 are covered if they work more than 30 hours a week. The previous $450-per-month earnings threshold has been removed, so most employees are now covered regardless of how much they earn.

The concessional contributions cap is $32,500 from 1 July 2026 (up from $30,000 in 2025-26). It covers SG, salary sacrifice and personal deductible contributions.

SG contributions are currently taxed at 15%. If your combined incomes are over $250,000 then these contributions may be taxed at 30%.

For example;

Use the calculator on this page for a worked example with current figures.

The concessional contributions cap (which includes SG and salary sacrifice contributions) is $32,500 from 1 July 2026. From 1 July 2023 you can use up to 5 years worth of any unused portions of your concessional cap if the total of all your superannuation funds is under $500,000 (this excludes super in pension phase). The unused portions start from 1 July 2018 and would allow a member to exceed the $32,500 cap.

Salary sacrifice contributions

Salary sacrifice contributions involves sacrificing salary for super contributions. This has the following consequences;

• Your salary decreases and so does your taxable income. You pay less tax.
• The contribution is taxed at 15% and so there may not be much benefit for those on low incomes ($37,000 and below) as their salary may have been taxed at a lower rate had they not sacrificed it.
• If your income plus your before-tax super is over $250,000 then contributions may be taxed at 30% making the strategy more challenging.
• If you are on a higher tax bracket there is an immediate gain as a result of the income being taxed at 15% instead of their higher marginal rate.
• The contributions boost your retirement savings.

How much salary can I sacrifice?

You can contribute and deduct up to $32,500 pa. This includes your SG contributions. If your total super balance is below $500,000 you can carry forward any unused portion of your cap from the previous five financial years.

I am self employed. Can I salary sacrifice?

Yes, you can make pre-tax contributions in exactly the same way and to the same extent as an employed person. That means you can contribute and deduct (for tax purposes) up to $32,500 pa.

For example;

John earns $70,000 pa and makes a salary sacrifice contribution of $10,000. The net benefit is the extra that lands in super after 15% contributions tax, less the drop in his take-home pay.

The net benefit is calculated as the net salary sacrifice contribution (less 15% tax) less the drop in net income.

Tax on excess contributions

If you exceed the concessional contribution cap the excess is added to your assessable income with a 15% offset to acknowledge 15% has been paid on the contributions. You can release up to 85% of your excess contributions as an alternative strategy.

Carry forward unused concessional

You are able to carry forward your unused concessional contributions cap space amounts from 1 July 2018  if you have a total superannuation balance of less than $500,000 at the end of 30 June in the previous year and you made concessional contributions in the financial year that exceeded your general concessional contributions cap. Unused amounts are available for a maximum of five years and will expire after this.

Personal contributions

Personal after-tax (non-concessional) contributions are a way to boost your superannuation. For 2026–27 you can generally contribute up to $130,000 in after-tax contributions each financial year without paying extra tax. The benefits are:

• The contributions add directly to your retirement savings.
• If you have excess before-tax (concessional) contributions in your super, the excess counts towards your after-tax cap as well.

Who can make personal contributions?

Since the 2022–23 tax year, anyone aged 18 to 74 can make personal (non-concessional) contributions without satisfying the work test. After age 75, your fund can generally only accept mandated employer (Superannuation Guarantee) contributions.

The work test does still apply if you want to claim a tax deduction for a personal contribution and you are aged 67 to 74. Before claiming the deduction you must give your super fund a Notice of intent to claim or vary a deduction for personal super contributions (NAT 71121) and receive an acknowledgment from your fund — before you lodge your tax return.

For example

John contributes $390,000 into his super fund using after-tax money in a single year. Under the bring-forward rule he can use up to three years' worth of his annual cap at once (3 × $130,000), so as long as he doesn't trigger another bring-forward until the three-year period has run, he won't exceed his cap. If he'd prefer to contribute each year instead, he must keep the total in any rolling three-year period within $390,000.

Bring forward unused cap amounts

Whether you can bring forward future caps — and how many years — depends on your total super balance (TSB) at 30 June of the previous financial year. The thresholds are tied to the general transfer balance cap of $2,100,000:

Government co-contributions

The government co-contribution helps low and middle-income earners boost their superannuation by adding up to $500 a year. There is no need to apply — if you are eligible and your fund has your tax file number, the ATO pays it into your account automatically after you lodge your tax return.

Who is eligible?

To qualify you must:

• Make one or more personal (after-tax, non-concessional) contributions to a complying super fund during the year.
• Have a total income below the higher income threshold of $64,293 for 2026–27 (see how the amount is worked out below).
• Earn at least 10% of your total income from eligible employment, carrying on a business, or a combination of both.
• Be under 71 years of age at the end of the financial year.
• Not hold a temporary visa at any time during the year (unless a New Zealand citizen or holder of a prescribed visa).
• Lodge a tax return for the year.
• Have a total super balance below the general transfer balance cap ($2.1 million) at 30 June of the previous year.
• Not have exceeded your non-concessional contributions cap ($130,000) for the year.

How much will you get?

The co-contribution is the lesser of:

• 50 cents for every dollar of your eligible personal contribution; and
• the maximum for the year, which is $500 if your income is at or below the lower threshold of $49,293.

If your income is between $49,293 and $64,293, the $500 maximum reduces by 3.333 cents for every dollar of income above $49,293. At or above $64,293 you receive nothing. The minimum payment, where you are entitled to one, is $20.

For example

John earns $45,000 from eligible employment — below the $49,293 lower threshold — and makes a personal after-tax contribution of $1,000 to his complying fund. His co-contribution is the lesser of 50% of $1,000 ($500) and the $500 maximum. He receives the full $500.

If John had instead contributed only $400, his co-contribution would be 50% of $400 — that is, $200 — because half his contribution is less than the $500 maximum.

Spouse contributions

Spouse contributions

If your spouse has assessable income below $37,000 (plus report able fringe benefits) you can make contributions to his or her superannuation and receive a tax offset of up to $540 for those contributions. It phases out at $40,000.

You can’t contribute more than your partner’s non-concessional contributions cap, which is $130,000 per year for everyone. However, if your partner is under 75, you may be able to contribute up to three financial years of this cap in the one year (under bring-forward rules) which would allow a maximum contribution of up to $390,000.

Essential conditions are;

• you contribute to the eligible super fund of your spouse, whether married or de-facto, and
• your spouse's income is $37,000 or less.

You will not be entitled to the tax offset when your spouse receiving the contribution:

• exceeds their non-concessional contributions cap for the relevant year, or
• has a total superannuation balance equal to or exceeding the general transfer balance cap ($2.1 million) immediately before the start of the financial year in which the contribution was made.

The tax offset amount will gradually reduce for income above this amount and completely phases out when your spouse’s income reaches $40,000.

The following eligibility requirements remain in place before and after 1 July 2017:

• both you and your spouse must be Australian residents when the contributions are made
• the contributions must not be made to satisfy a family law obligation to split contributions with your spouse
• the contributions must be made to a complying superannuation fund or a retirement savings account on behalf of your spouse
• you and your spouse must not be living separately or apart on a permanent basis when the contributions are made
• the contributions must not be deductible to you.

Downsizing contributions

From 1 January 2023, if you are 55 years old or older and meet the eligibility requirements, you may be able to choose to make a downsizer contribution into your superannuation of up to $300,000 from the proceeds of selling your home.

Your downsizer contribution is not a non-concessional contribution and will not count towards your contributions caps. The downsizer contribution can still be made even if you have a total super balance greater than $2.1 million.

The downsizer contribution will count towards your transfer balance cap, currently set at $2.1 million. This cap applies when you move your super savings into retirement phase.

You can only access the downsizer scheme once and each spouse can access the $300,000.

Downsizer contributions are not tax deductible and will be taken into account for determining eligibility for the age pension. There is no requirement for you to purchase another home.

What are the requirements?

• you are 55 years old or older at the time you make a downsizer contribution (there is no maximum age limit)
• the amount you are contributing is from the proceeds of selling your home where the contract of sale exchanged on or after 1 July 2018
• your home was owned by you or your spouse for 10 years or more prior to the sale – the ownership period is generally calculated from the date of settlement of purchase to the date of settlement of sale
• your home is in Australia and is not a caravan, houseboat or other mobile home
• the proceeds (capital gain or loss) from the sale of the home are either exempt or partially exempt from capital gains tax (CGT) under the main residence exemption, or would be entitled to such an exemption if the home was a CGT rather than a pre-CGT (acquired before 20 September 1985) asset
• you have provided your super fund with the Downsizer contribution into super form either before or at the time of making your downsizer contribution
• you make your downsizer contribution within 90 days of receiving the proceeds of sale, which is usually at the date of settlement
• you have not previously made a downsizer contribution to your super from the sale of another home.

What fees do I pay in my super?

You are probably paying some or all of the following fees.

• Member fees - these are administration fees that will be duplicated in multiple funds.
• Investment fees (MER) - these are the fees charged to invest your funds usually a percentage of the balance. This is often the biggest cost.
• Contribution fees - these are the fees charged to collect and invest fees.
• Adviser fees - these are the fees paid to an adviser for personal advice.
• Insurance premiums - these are the premiums paid for your insurance cover in the fund.
• Other fees - there could be other fees such as establishment fees, withdrawal fees, exit fees, performance fees, switching fees and more.

There is a wide discrepancy in total fees. A difference of 1% can mean a reduction in the final value of 20%.

Member fees

Often members in the same fund pay a different percentage with those holding lower balances paying a higher percentage but lower fee. For example, 1% on a $100,000 balance is $1,000. A 0.5% fee on a balance of $1,000,000 is $50,000. Some funds have a cap on the amount of fees a member can pay.

Investment fees (MER)

These are the fees paid to the investment manager and can include a performance fee where some of the growth ahead of a specific return is retained by the manager. This is usually the biggest fee and returns usually make the biggest difference to retirement values.

Contribution fees

Some funds charge an extra fee to collect and forward the contributions to the investment manager.

Switching fees

Some funds charge a switching fee to switch to another portfolio or investment option.

Advice fees

These are the fees paid to an adviser for personal advice. Advisers who sold a fund to an employer were often rewarded with an "advice fee" deducted every month from the members account whther or not they had received any advice. Most members had never seen the adeviser or even knew about the fee.

As part of FOFA (Future of Financial Advice) any ongoing advice fee with a retail client must be supported by a FDS (Fee Disclosure Statement).

Insurance premiums

Insurance premiums are also deducted to cover the cost of providing Death, Disability and Income Protection cover.

Most funds have a default level of cover that can be increased or decreased. This cover is usually cheaper than can be negotiated outside the fund and is alos usually provided without proof of health.

Establishment fee

Some funds may charge a fee to set up all the member records and deductions.

Withdrawal fee

Withdrawal fees can be charged every time a member makes a withdrawal from their superannuation. This is ostensibly to cover the cost of processing the withdrawal.

Exit fee

Exit fees may be imposed on a fund or member who exits in order to move to a new fund with a new provider. This may be seen as a punishment or disincentive to exit but may be warranted if the fund has been paying bonuses that are as yet unearned.

How much super is enough?

The table below is the ASFA (Association of Superannuation Funds of Australia) suggestion of what counts as "enough super". It assumes the retiree(s) own their own home.

ASFA Retirement Standard — September Quarter 2025

Note: the figures assume the retiree(s) own their own home and relate to expenditure by the household. This can be greater than household income after tax where capital is drawn down over the period of retirement.

How do you get "enough super"?

The crucial factors are:

• Time. The longer you contribute and enjoy growth, the better.
• Returns. The higher the net returns, the better.
• Inflation. Inflation erodes the real value of your savings over time.
• Contributions. The more you contribute, the better — and salary sacrifice is a tax-effective way to do it.

Use the calculator on this page for a worked example with current figures.

Consolidating super

There are many reasons to consolidate your super into a single fund but fees and the convenience of monitoring a single fund are dominant motivations.

Reduce Fees

Multiple funds means duplicated fees. Typical fees are;

• Member fees - these are administration fees that will be duplicated in multiple funds.
• Investment fees (MER) - these are the fees charged to invest your funds usually a percentage of the balance. This is often the biggest cost.
• Contribution fees - these are the fees charged to collect and invest fees. They would be duplicated in multiple funds.
• Adviser fees - these are the fees paid to an adviser for personal advice. They would be duplicated in multiple funds.
• Insurance premiums - these are the premiums paid for your insurance cover in the fund.
• Other fees - there could be other fees such as establishment fees, withdrawal fees, exit fees, performance fees, switching fees and more.

Over 30 years, a 1% reduction in fees results in a 20% increase in benefit.

Easier to monitor super

Multiple funds means multiple member statements detailing contributions, performance and fees. The member then has to collate all this information to get an accurate picture.

Consolidating all your funds into a single fund means there is only one member statement which will give an accurate picture of your superannuation arrangements.

Overall spring clean

Consolidation is an opportunity to give your super a "spring clean" and address the other important elements of your super.

• Insurance. Which fund offers the best cover at the best premium? Be sure you will get cover in the new fund before switching.
• Returns. Past performance is no guarantee of future performance but do you expect better performance in any fund?
• Asset mix. The new fund must have an asset mix that matches your risk profile.
• Costs. Which fund has the better cost structure.
• Service. Do any of the funds have a service benefit you value like on-line switching?

If none of your funds have the cost/benefits you are looking for you can rollover your funds into a new one.

Account-based pension

An account-based pension is an income stream purchased with a lump sum from your superannuation fund. You must meet a condition of release — such as reaching your preservation age (see below) — or start a transition-to-retirement (TTR) pension.

The total amount of superannuation that can be transferred into pension phase is capped at $2.1 million for 2026–27 (the Transfer Balance Cap, or TBC). This value is net (not gross), so any borrowings such as a limited recourse loan can be deducted.

Members with a balance in excess of $2.1 million will need to either:

• transfer the excess amount to a superannuation account in accumulation phase; or
• withdraw the excess amount from their account.

Any excess over $2.1 million is taxed. The TBC is indexed in $100,000 increments in line with the consumer price index (CPI). Where a member has used all of their personal cap, indexation no longer applies to them; if only a proportion has been used, the unused proportion continues to be indexed.

Preservation age

Preservation age is now 60 for everyone. You must reach age 60 (and generally meet a condition of release, such as retiring) before you can access your super as an account-based pension. The old sliding scale of 55–60, based on date of birth, no longer applies.

How much has to be withdrawn?

Each year you must withdraw a minimum percentage of your pension balance (measured at 1 July), based on your age:

There is no maximum, except for a TTR pension that is not in retirement phase, where the maximum is 10% of the balance. The temporary 50% reduction in minimum drawdown rates that applied during the COVID-19 years ended on 30 June 2023 — the standard rates above now apply.

Other features

You can withdraw lump sums (unless it is a TTR pension) at any time, or roll the pension back into accumulation phase. The pension is not guaranteed and is paid until the balance is exhausted. On death, the pension is paid to your estate, your beneficiaries, or a reversionary beneficiary (if any). If the reversionary beneficiary is a child, they receive the payments until age 25, when the balance is paid to them as a lump sum. A spouse or dependant may take the benefit as a pension or lump sum; non-dependants must take it as a lump sum.

The pension is assessed by Centrelink. Other benefits include:

• No tax is paid on the pension unless it is a TTR pension, in which case earnings are taxed at 15%.
• Pension payments are tax-free after age 60.

Members should ensure there is no conflict between any binding death benefit nomination and the reversionary beneficiary of the pension.

Use the calculator on this page for a worked example with current figures.

Will my account-based pension impact my age pension?

Firstly, you must be of Age Pension age to receive the age pension.

Qualification age

The Age Pension age is 67 (for anyone born on or after 1 January 1957). You must also meet residency requirements and the income and assets tests.

Under Age Pension age

If you are under Age Pension age and not drawing on your super, your super assets are generally not assessed by Centrelink. If you are under Age Pension age but receiving payments from your super fund, your super is assessed — it counts towards the assets test and may be deemed to earn an assessable income for the income test.

Pension phase — how account-based pensions are assessed

Under rules that have applied to account-based pensions commenced since 1 January 2015, your super is effectively tested twice. First, your pension balance counts under the assets test. Second, it is subject to deeming under the income test — Centrelink assumes your financial assets earn a set rate of income, whether or not you actually draw that much.

Current deeming rates

From 20 March 2026 the deeming rates are:

• Singles: 1.25% on the first $64,200 of financial assets, and 3.25% on the balance.
• Couples: 1.25% on the first $106,200 of combined financial assets, and 3.25% on the balance.

Financial assets include your account-based pension balance, along with bank accounts, term deposits, shares and managed investments. Because payments are assessed under both tests, the test that produces the lower pension is the one that applies.

Use the calculator on this page for a worked example with current figures.

Transition to Retirement (TTR)

A transition to retirement (TTR) strategy allows someone who has reached preservation age (now 60) and is still working to access their superannuation by starting a TTR pension. This pension cannot be converted back to a lump sum. The additional income can be used either to boost superannuation, or to supplement income if they choose to work fewer hours and earn less.

Strategy #1: Boost your superannuation

Start an account-based TTR pension and draw down between 4% and 10% of the account balance each year. Earnings on the TTR balance are taxed at 15% (the tax exemption was removed from 1 July 2017). The $2.1 million transfer balance cap does not apply to a TTR pension while it remains in the pre-retirement phase. You then salary sacrifice into your super fund and use the tax-free pension payments to replace the salary you have forgone.

Strategy #2: Use the pension to supplement a reduced salary

If you would rather work less than reinvest, you can use the pension to top up a smaller salary.

Notes

From 1 July 2017 the earnings on TTR balances are taxed at 15% rather than being tax-free; this can be offset by any franking credits. Because the concessional cap is $32,500 a year (including SG), some people running a TTR strategy will have less room to salary sacrifice than in earlier years. The loss of the earnings exemption does not affect the pension payments themselves, which remain tax-free from age 60. It is advisable to obtain advice from a qualified financial adviser to choose the right pension, drawdown amount and salary-sacrifice level for your circumstances.

The case studies above are illustrative only, use assumed 2026–27 rates, and are not personal financial advice.

Will my super survive a market crash?

A market correction can have a devastating effect on your retirement plans. If you have enough to survive there is every chance your balance will recover and even increase. The crucial factors will be;

• How much super you have.
• How severe the turn-down.
• How long it lasts.
• How much you draw down.
• How robust the recovery.

When returns can't cover draw downs

The larger your balance the more likely you will survive the crash. Assuming you had a balance of $1,000,000 in a fund earning a net 5% pa from which you drew down $50,000 pa. This will leave the balance almost static - you withdraw as much as is earned.

During a market crash your balance is eroded by negative performance as well as the $50,000 pa you need. When the market bottoms out you will need much better performance than 5% to cover your $50,000 withdrawal and the likelihood is you will need to draw down capital.

As you draw down capital the depleted balance reduces further and the situation deteriorates. Only stellar returns will restore the situation to where it was before the crash.

The 1987 crash was followed by stellar returns and 10 years after the crash the retiree in the example above would be almost back to the original balance of $1,000,000 having withdrawn $50,000 pa throughout. After 8 years the balance would have been $671,192. The GFC saw a less "robust" recovery and 8 years after the crash (May 2016) the balance would only be around $622,697, close to the 1987 balance.