SMSF Pensions

Why you should start a pension

Why You Should Start a Pension in Your SMSF

Starting a pension within your Self-Managed Super Fund (SMSF) offers significant tax advantages. The primary benefit is that all income generated within the pension account—excluding concessional contributions—is completely tax-exempt.

Preservation age

Understanding Preservation Age

You can only start a pension account in your SMSF once you reach your preservation age. This age varies depending on your birth date.

What is an Account-Based Pension?

An account-based pension is a regular income stream paid from your SMSF member account after you reach your preservation age. It offers both tax benefits and potential social security advantages, making it an efficient way to draw down your retirement savings.

Conditions of Release for SMSF Pensions

To withdraw the benefits from your SMSF , you must satisfy one of the conditions of release:

If you are between your preservation age and 65, you need to retire with no intention of returning to full- or part-time work.
After you turn 65, you can access your pension benefits at any time without restrictions, as reaching age 65 itself is a condition of release.

There are other conditions of release beyond retirement. Learn more about them here.

Transition to Retirement Pension (TTR)

Not ready to retire but have reached your preservation age? You can start a Transition to Retirement (TTR) pension, allowing you to access up to 10% of your SMSF balance per year while still working.

Minimum and Maximum Pension Payments

Once your pension has started, you must withdraw at least the minimum pension payment each year. For clients of iCare Super, reminders are sent twice per financial year to help ensure compliance.

Failing to withdraw the minimum amount means the income generated by the pension account will lose its tax-exempt status and may trigger audit issues.

If your pension is not a TTR pension, there are no maximum withdrawal limits, and you can access the full pension balance at any time.

Actuarial Certificates Explained

If your SMSF holds both accumulation and pension accounts, many administrators obtain an actuarial certificate to calculate the tax-free percentage of your fund’s income. While helpful, this service typically costs between $200 and $300.

Pension Asset Segregation at iCare Super

At iCare Super, we use the segregated assets method to allocate specific assets directly to your pension accounts. Benefits include:

No fees for actuarial certificates.
High-income-generating assets are allocated to the pension account, ensuring the income remains tax-exempt.

Why Choose iCare Super?

Many SMSF administrators avoid providing segregation services due to their complexity. At iCare Super, we can use different methods to segregate the assets, making SMSF management simpler and more cost-effective for you.