By Philippa Billings, Chief Advice Officer, Otivo
For decades your super has one job, to grow. At retirement that job quietly flips. The same balance now has to produce an income, and the switch from saving mode to paying mode doesn't happen automatically, it's a set of choices you make. Nobody hands you a cheque and wishes you well. Here's what actually happens to your super when you retire, and the options in front of you.
Quick answer
When you retire and meet a condition of release, your super doesn't pay out automatically. You generally choose how to turn it into income, most commonly by moving it into an account-based pension, taking lump sums, or a mix of both. As at July 2026, up to the transfer balance cap of $2.1 million can be moved into the tax-free retirement pension phase.
Does my super get paid out automatically when I retire?
No. Reaching retirement and meeting a condition of release unlocks your super, but it stays in your fund until you decide what to do with it. Left alone, it simply remains in your accumulation account. Turning it into retirement income is an active step, which is why retirement is a decision point rather than an automatic event. Understanding that upfront avoids the common surprise that nothing happens unless you make it happen.
What are your options for turning super into income?
There are three broad paths. You can move your super into an account-based pension, which pays you a regular income drawn from your invested balance. You can take lump sums as you need them. Or you can combine the two, running a pension for steady income while keeping some available for one-off needs. Each has different implications for how long the money lasts and how it's taxed, which is why the choice deserves genuine thought rather than a default.
What is the retirement phase and how is it taxed?
Moving super into an account-based pension shifts it into what's called the retirement phase, and the tax treatment is a big part of the appeal. In this phase, investment earnings on the assets supporting your pension are generally tax-free, rather than taxed at up to 15% as in accumulation. There's a limit on how much can be moved in, the transfer balance cap, which is $2.1 million for 2026-27. Amounts above that cap stay in an accumulation account, where earnings continue to be taxed at the concessional rate.
Do you have to draw a minimum amount?
Yes, once you start an account-based pension. The government sets minimum annual payment rates based on your age, starting at 4% of the balance for those under 65 and rising as you get older. The minimum exists to ensure super is used for retirement income rather than held indefinitely as a tax shelter. You can generally draw more than the minimum if you need to, and the ATO publishes the current rates by age band.
Frequently asked questions
Do I have to move my super into a pension when I retire?
No. You can leave super in accumulation, move it into an account-based pension, take lump sums, or combine these. Moving it into a pension is common because earnings in the retirement phase are generally tax-free, but it isn't compulsory.
Is my super tax-free once I retire?
Investment earnings on assets supporting an account-based pension are generally tax-free in the retirement phase, up to the transfer balance cap of $2.1 million for 2026-27. For most people over 60, pension payments from a taxed fund are also tax-free.
Can I take my super as a lump sum at retirement?
Yes, once you've met a condition of release. Some people take lump sums for specific needs, though drawing large amounts reduces the balance left to generate ongoing income across a retirement that may last decades.
Where to from here
Retirement turns your super from a balance into an income, and how you make that switch shapes the years ahead. Otivo, a licensed Australian financial advice platform holding AFSL and Australian Credit Licence No. 485665, offers a retirement planning module that shows how your super could translate into income, based on your balance, age, spending and Age Pension eligibility. It helps you approach the switch with a plan rather than a default.
Sources
- Australian Taxation Office — retirement phase, transfer balance cap and minimum pension drawdown rates — ato.gov.au
- ASIC MoneySmart — account-based pensions and retirement income — moneysmart.gov.au
Disclaimer
The information in this communication is current as at July 2026 and has been prepared by Otivo Pty Ltd ABN 47 602 457 732, AFSL and Australian Credit Licence No. 485665. This content is general information only and has been prepared without taking into account your objectives, financial situation or needs. It is not personal financial or taxation advice and should not be relied on as such. Before acting on any information, you should consider its appropriateness having regard to your personal circumstances. This material must not be reproduced in whole or in part, or posted on any social media platform, without the prior written consent of Otivo Pty Ltd.