Lump Sum vs. Account Based Pension: What’s your retirement payout play?
Written and accurate as at: Aug 05, 2025 Current Stats & Facts
It turns out Australian retirees are taking very different approaches to their retirement payouts. We’ve always said that in retirement everyone is different. Some new CoreData research shows just how true that is.
The research found that about 46% of retirees plan to draw down their super money using an income stream, or Account Based Pension, 15% are considering an annuity-style lifetime income product with capital protection, while the rest are thinking of taking at least some of their money out in lump sum withdrawals.
Two things to note here:
(1) Slightly less than half of people are considering drawing their money down through an Account Based Pension, the vehicle designed for the purpose of providing ongoing flows of income (typically fortnightly or monthly) to super members.
That’s surprising since there’s a significant tax advantage on offer with Account Based Pensions – the earnings as well as payouts are tax free, unlike money in an “accumulation” super fund where earnings are taxed at up to 15%, or income earned on investments outside super like bank accounts and shares which is taxed at your marginal tax rate.
Now, that difference in tax can equate to a big difference in returns. Because they pay no tax on earnings, Account Based Pensions typically outperform their accumulation super fund cousin.
When you pay less tax you earn higher returns
Annualised Investment Returns five years through June 2025
| Portfolio type |
Accumulation Fund (up to 15% tax) |
Account Based Pension (Zero tax) |
| Capital Stable | 4.5% | 5.1% |
| Balanced Growth | 8.3% | 9.3% |
| Growth | 9.9% | 10.8% |
Source: SuperRatings estimates
