Age Pension vs Retirement Pension: How Will You Fund Retirement

Title: Age Pension vs Retirement Pension: How Will You Fund Retirement
Short description: Confused about the Age Pension vs retirement pension accounts? Learn the key differences, eligibility rules, and how they impact your retirement income strategy.
Topics: mlc:Topics/retirement
Time to read/watch: 7 min
Effective date: 2025-09-01 00:00
Feature Image: /content/dam/mlc/insights/images/Articles/2025/age-pension-vs-retirement-pension-how-will-you-fund-retirement.jpg
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Navigating retirement income in Australia can be complex, especially when it comes to understanding the difference between the Age Pension and a retirement pension account.

While both provide financial support in retirement, they operate under different systems, with distinct eligibility rules and implications for your overall income strategy.

Understanding the Age Pension in Australia

The Age Pension is a government-funded payment designed to support older Australians who meet specific criteria. Managed by Centrelink, it’s available to individuals who:

Are aged 67 or older (as of 2025)
Meet residency requirements
Pass income and assets tests

The Age Pension acts as a safety net for those with limited retirement savings and is paid fortnightly. Eligibility is reassessed regularly, and your financial situation - including income from other sources - can affect how much you receive.

What Is a retirement pension account?

A retirement pension account allows retirees to draw regular income from their accumulated super savings. The most common one is known as an account-based pension. This is not a government payment—it’s managed by your super fund and offers flexibility in how much and how often you withdraw funds.

To access a retirement pension, you must:

Reach your preservation age (age 60)
Meet a condition of release, such as retirement or reaching age 65 (even if you haven’t retired)

Unlike the Age Pension, there are minimum withdrawal requirements set by law, but you can tailor your payments to suit your lifestyle and financial needs.

Key Benefits of a Retirement Pension account

Tax-Free Investment Earnings

Once you move your super into a pension phase account, the investment earnings—like interest, dividends, and capital gains—are generally tax-free. That means more of your money stays invested and working for you.

Flexible Income Access

You’re in control. Choose how much and how often you’d like to receive payments, whether it’s monthly, quarterly, or annually. It’s designed to fit your lifestyle and cash flow needs in retirement.

Keep Growing Your Retirement Savings

Even while you’re drawing an income, your remaining balance stays invested. This gives your money the potential to continue growing, helping your retirement savings last longer.

MLC Pension Bonus

Eligible members may receive a pension bonus from MLC, which can give your retirement savings a boost by increasing the amount you have invested. Find out more about MLC’s Pension Bonus.

Key Differences Between Age Pension and Retirement Pension

Understanding the difference between Age Pension and the retirement pension through your super is crucial for effective retirement planning:

Feature	Age Pension	Retirement Pension
Source	Government	Your super fund from your super savings
Eligibility	Age (67), residency, income/assets tests	Preservation age (60) + condition of release
Flexibility	Fixed fortnightly payments	Customisable withdrawals Note: Withdrawals are subject to an annual minimum amount, as set by legislation
Means-tested	Yes	No (but may affect Age Pension eligibility)

How Your Retirement Pension Can Affect Age Pension Entitlements

Drawing income from your super can impact your Age Pension eligibility due to the pension income and assets tests. Centrelink assesses your total financial situation, including:

The balance of your retirement pension account
Apply an income assessment
Other assets and investments

This means that even if you qualify for the Age Pension, your payments may be reduced depending on how much you have held in your retirement pension. Centrelink provides additional information on the treatment of income streams.

Planning Your Retirement Income Strategy

Combining both the Age Pension and a retirement pension can be part of a smart retirement planning strategy. Many Australians use their super to supplement the Age Pension, ensuring a more comfortable lifestyle.

If you're considering a transition to retirement pension, or you're unsure how your choices affect your entitlements, it’s wise to speak with a financial adviser or use tools like Centrelink’s Income and Assets Calculator.

Final Thoughts

Retirement should be a time to enjoy life, not stress over finances. By understanding the roles of the Age Pension and retirement pension accounts, you can make informed decisions that support your goals and lifestyle.

Let’s get in touch

Getting expert help is all part of being with MLC. As a service to our members, our team of Financial Coaches* provide general advice related to your super, at no additional cost.

If you are a member with us, book your appointment with a Financial Coach today.

Our financial coaches also offer a Government Age Pension concierge service. This service is available to members where they, their spouse, or their de facto partner, are aged 66+.

Another tool available to eligible members at no additional cost is our Personal Super Calculator. By securely using your information, it generates a personalised super report in under 10 minutes. This report provides advice and strategies you can take today and to help you create the future you want tomorrow.¹

References

¹If you log into your super account and cannot find the Personal Super Calculator it might be because you're not eligible to access this service. To be eligible to access the Personal Super Calculator you need to meet the following criteria:

• Age 18 - 66
• Salary less than $250,000
• Super balance of less than $1.88 million
• Have not exceeded the current annual general super contributions caps
• Are not paying an Adviser Service Fee
• Have provided your tax file number
• Hold one of the following MLC super accounts:

1. MasterKey Business Super
2. MasterKey Personal Super
3. MasterKey Super Fundamentals

If you're unsure if these conditions apply to you, our Financial Coaches can help with any questions you may have, at no extra cost. Book a consultation

The information in this article is current as at July 2025 and may be subject to change.

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Important information and disclaimer

This article has been prepared by NULIS Nominees (Australia) Limited ABN 80 008 515 633 AFSL 236465 (NULIS) as trustee of the MLC Super Fund ABN 70 732 426 024. NULIS is part of the Insignia Financial group of companies comprising Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (‘Insignia Financial Group’). This information may constitute general advice. The information in this article is general in nature and does not take into account your personal objectives, financial situation or needs. You should consider obtaining independent advice before making any financial decisions based on this information. It is recommended that you consider the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD) before you make any decisions about your superannuation. You can obtain the latest copy of the PDS (or other disclosure documents) and TMD by calling us on 132 652 or by searching for the applicable product at mlc.com.au. You should not rely on this article to determine your personal tax obligations. Please consult a registered tax agent for this purpose. Opinions constitute our judgement at the time of issue. The case study examples (if any) provided in this article have been included for illustrative purposes only and should not be relied upon for decision making. Subject to terms implied by law and which cannot be excluded, neither NULIS nor any member of the Insignia Financial Group accept responsibility for any loss or liability incurred by you in respect of any error, omission or misrepresentation in the information in this communication.

The Financial Coaches provide financial advice under the Australian Financial Services licence (AFSL) of Actuate Alliance Services Pty Ltd ABN 40 083 233 925 AFSL 240 959 (Actuate). NULIS Nominees (Australia) Limited ABN 80 008 515 633, AFSL 236465 (NULIS) is the trustee of MLC Super Fund ABN 70 732 426 024 (Fund). Actuate and NULIS are both companies within Insignia Financial Group which comprises Insignia Financial Ltd ABN 49 100 103 722 and its related bodies corporate (Insignia Financial Group). No other entity within Insignia Financial Group, including NULIS or any other entity within the Insignia Financial Group that is a trustee for a regulated superannuation fund, is liable for or responsible for any work, action or advice provided by Actuate.