Once one of your clients starts a pension, there is a legislated minimum amount required to be paid out each year. There is no maximum amount other than the balance of their super account, unless it is a transition to retirement pension that is not in retirement phase, in which case the maximum amount is 10% of the account balance.
The purpose of minimum pension payments links back to the sole purpose test — super is intended for retirement, not as a tax-efficient way to transfer wealth to future generations (which is where products like testamentary trusts can be useful).
The minimum annual payment amount is worked out by multiplying the member’s pension account balance by a percentage factor. The percentages set out at present are as follows, and are based on the age of the fund member.
| Age | Minimum % withdrawal |
| Under 65 | 4% |
| 65–74 | 5% |
| 75–79 | 6% |
| 80–84 | 7% |
| 85–89 | 9% |
| 90–94 | 11% |
| 95 or more | 14% |
The government says these rates aim to ensure that funds are withdrawn from the tax‑free environment over time. Earnings on assets supporting superannuation pensions are tax free, as is the pension income for people aged 60 or over.
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