When you move your super into an account-based pension, the investment earnings on that money become tax free. In exchange, the law requires you to withdraw at least a minimum amount every financial year. The required percentage rises as you get older.
For most retirees with a pension through a large super fund, the minimum is handled automatically. For those running their own pension through a self-managed super fund (SMSF), or anyone who has changed their payment arrangements, missing the minimum can be costly. The pension can lose its tax-free status for the whole year, and the fix is not always simple.
This guide sets out the current minimum drawdown rates, how the minimum is calculated, how it applies when a pension starts or ends part-way through a year, and what happens if the minimum is not met.
Minimum pension drawdown rates for 2026-27
The minimum annual payment is a percentage of your pension account balance, based on your age. The standard rates apply for the 2026-27 financial year.
| Age | Minimum annual drawdown | Minimum on a $500,000 balance |
|---|---|---|
| Under 65 | 4% | $20,000 |
| 65 to 74 | 5% | $25,000 |
| 75 to 79 | 6% | $30,000 |
| 80 to 84 | 7% | $35,000 |
| 85 to 89 | 9% | $45,000 |
| 90 to 94 | 11% | $55,000 |
| 95 and over | 14% | $70,000 |
These are the standard rates set out in the superannuation regulations. During the COVID-19 period the government temporarily halved them, but that reduction ended on 30 June 2023, and the full rates have applied since 1 July 2023. The government has the power to reduce the rates again in extraordinary market conditions, but no reduction applies for 2026-27.
The rates apply to account-based pensions, including transition to retirement income streams. Account-based pensions are explained in more detail in our guide to account-based pensions and practical retirement advice.
Why the minimum exists
Super in retirement phase receives significant tax concessions. Investment earnings on pension assets are tax free, and pension payments are generally tax free from age 60. The minimum drawdown rules ensure that pension accounts are used to provide retirement income, rather than as a tax-free investment vehicle to be passed on intact.
The rising percentages reflect the expectation that, as life expectancy shortens, a greater share of the balance should be paid out each year. They are a legal minimum, not a recommendation about how much you should spend.
How the minimum is calculated
The basic calculation is:
Minimum annual payment = pension account balance on 1 July × percentage factor for your age
Three details matter:
- The balance is taken on 1 July each year, or on the day the pension starts in its first year. Market movements during the year do not change the minimum for that year.
- Your age is also taken on 1 July, or on the start date in the first year. If you turn 75 in August, the 5% rate still applies for that financial year, and the 6% rate starts the following 1 July.
- The result is rounded to the nearest $10.
For example, a retiree aged 72 with a pension balance of $480,000 on 1 July must withdraw at least $24,000 (5%) by 30 June. That can be paid in any combination of regular payments, such as monthly or quarterly, or as one or more larger pension payments, as long as the total for the year reaches $24,000.
When a pension starts part-way through the year
If your pension starts after 1 July, the minimum for the first year is reduced in proportion to the number of days remaining in the financial year:
Minimum = balance at start date × percentage factor × (days remaining including the start date ÷ days in the year)
For example, a 66-year-old who starts a pension with $400,000 on 1 October has 273 days remaining in the financial year. Their first-year minimum is $400,000 × 5% × 273/365, which is about $14,960 after rounding.
If the pension starts on or after 1 June, no minimum payment is required for that first financial year. The full minimum applies from the following 1 July.
Starting a pension is one of the key steps covered in our guide on what happens to your super when you retire.
What counts towards the minimum
Only pension payments count towards the minimum.
Since 1 July 2017, partial commutations do not count. A partial commutation is where you convert part of your pension into a lump sum, for example to take a larger one-off withdrawal or to transfer assets out of the pension in specie. Partial commutations are sometimes used deliberately, because they create a debit to your transfer balance account, but they must be made in addition to the minimum, not instead of it. Our guide to the transfer balance cap explains why that debit can matter.
For retirees in large super funds, the distinction is usually managed by the fund. For SMSF members, it needs to be documented correctly at the time of the withdrawal, because a payment cannot be reclassified after the event.
When a pension is fully commuted or rolled over
If you fully commute your pension during the year, for example to roll it over to another fund, return it to accumulation phase, or start a new pension with a combined balance, a pro-rata minimum must be paid before the commutation takes place. The pro-rata amount is based on the number of days from 1 July to the date of commutation.
This catches people out when changing funds or consolidating pensions late in the year. Most large funds pay the pro-rata amount automatically as part of the rollover, but SMSF trustees need to arrange it themselves.
What happens when a pensioner dies
The rules depend on whether the pension is reversionary.
- Reversionary pensions. If the pension automatically reverts to a spouse or other dependant, the pension continues and the minimum for that year must still be paid. It is not recalculated, and payments made before and after the death both count towards it.
- Non-reversionary pensions. If the pension ends on death and is paid out as a death benefit, the ATO accepts that the pension remains compliant for the year even if the full minimum had not been paid before the death.
Our guide on what happens to your Age Pension and super when your partner dies covers the wider implications for a surviving partner.
What happens if you don’t withdraw the minimum
If the minimum is not paid by 30 June, the pension is treated as not meeting the pension standards. For tax purposes, the consequences are serious:
- The pension is treated as having ceased at the start of the financial year, not on 30 June.
- Payments made during the year are treated as super lump sums, not pension payments.
- The earnings on the assets supporting the pension lose their tax-free status for the year, and are taxed as if they were in accumulation phase. For an SMSF, this means the fund cannot claim exempt current pension income on those assets for the year.
- The transfer balance account needs adjusting, and a new pension must be started if you want to continue receiving tax-free pension income. That new pension creates a new credit to your transfer balance account.
On a large pension balance in a strong investment year, the lost tax exemption alone can cost many thousands of dollars, along with the administrative cost of restarting the pension and correcting the fund’s reporting.
Is there any relief?
The ATO allows limited relief in specific circumstances. SMSF trustees can self-assess that the pension continued to meet the standards if all of the following apply:
- the shortfall was no more than one-twelfth of the required minimum,
- it was caused by an honest mistake or by matters outside the trustee’s control,
- the shortfall is paid as soon as practicable in the following financial year, and
- the relief has not been used before.
Where the shortfall is larger, or the relief has already been used, trustees can ask the Commissioner to exercise discretion, but there is no guarantee it will be granted. Catch-up payments made under either approach count towards the year in which they should have been paid, not the year in which they are made, so the following year’s minimum still needs to be met in full.
Members of APRA-regulated funds whose minimum has not been met should contact their fund, which will generally manage any correction.
Is there a maximum withdrawal?
For a standard account-based pension, there is no maximum. You can withdraw as much as you like above the minimum, as either pension payments or lump sums.
The exception is a transition to retirement income stream, where you have reached preservation age but not met a condition of release such as retirement. Withdrawals are capped at 10% of the balance each year, and lump sums are generally not permitted. Our guide to the transition to retirement strategy explains how these pensions work.
The minimum is not a spending plan
The minimum drawdown rate is a legal floor, not a recommendation about how much you should spend.
For many retirees in their 60s and early 70s, the minimum is lower than they need to fund their lifestyle, and they withdraw more. For those in their late 80s and 90s, the minimum can be higher than they need, and the surplus must still come out of super.
Withdrawing more than you need, whether to meet the minimum or for any other reason, moves money from a tax-free environment into your own name, where investment earnings may be taxed and the money is counted differently under the Age Pension means tests. Options for surplus withdrawals include holding them in an offset or savings account for future spending, investing them in your own or a spouse’s name, gifting within the Centrelink limits, or recontributing them to super where you are eligible. Our guides on tax-aware investing across structures and gifting rules and the Age Pension cover the main considerations.
Equally, retirees who draw only the minimum because they are worried about running out can end up living more frugally than they need to. Our guides on creating a sustainable retirement income and what happens if you run out of money in retirement help put the minimum in context.
Drawdowns during a market downturn
Because the minimum is based on the 1 July balance, a sharp market fall during the year does not reduce that year’s minimum. A retiree who has invested every dollar of their pension in growth assets may be forced to sell investments at low prices to fund the required payments.
The usual protection is to hold one to three years of pension payments in cash and other defensive assets within the pension account, so payments can be made without selling growth assets after a fall. Our guides on protecting retirement income during market downturns and how investment strategy changes in retirement explain how this works.
Minimum drawdowns and the Age Pension
For Age Pension purposes, account-based pensions are assessed using the full account balance under the assets test and deeming under the income test. The actual payments you withdraw are not counted as income. That means drawing more or less from your pension does not directly change your assessed income, although withdrawals reduce your balance and therefore your assessed assets over time. Our guide on Centrelink deeming rates explains this treatment.
Practical tips for meeting the minimum
Check your payment settings each July. Large funds generally recalculate your minimum automatically, but if you have set a fixed payment amount, check that it still meets the new minimum, particularly in a year when you move into a higher age bracket.
SMSF trustees should not leave it to June. Paying regularly throughout the year, or at least making a substantial payment early, reduces the risk of a shortfall caused by banking delays, illness or travel. Payments must actually be paid by 30 June, so allow time for bank processing rather than relying on a last-day transfer.
Document lump sums correctly. Decide at the time whether a lump sum is a pension payment or a partial commutation, and record it accordingly.
Plan ahead for fund changes. If you are rolling over, consolidating or restarting a pension, confirm that the pro-rata minimum has been paid before the commutation happens.
Where professional advice adds value
Meeting the minimum drawdown is a compliance requirement, but deciding how much to draw, from which account, and what to do with any surplus is a planning decision. It affects tax, the Age Pension, investment strategy, estate planning and how long your savings last.
A financial adviser can set your pension payments to meet the minimum with appropriate headroom, structure withdrawals across partners and accounts to manage tax and transfer balance cap positions, and build a cash reserve so payments do not depend on market conditions. For SMSF members, an adviser can also help put the processes in place to avoid the costly consequences of a missed payment.
If you would like help planning your retirement income, our retirement planning advisers in Adelaide can help you work through it.
Frequently asked questions
What are the minimum pension drawdown rates for 2026-27?
The standard rates apply: 4% under age 65, 5% for ages 65 to 74, 6% for 75 to 79, 7% for 80 to 84, 9% for 85 to 89, 11% for 90 to 94, and 14% for age 95 and over. The temporary 50% reduction that applied during the COVID-19 period ended on 30 June 2023.
How is the minimum pension payment calculated?
Multiply your pension account balance on 1 July by the percentage factor for your age on that date, and round to the nearest $10. If the pension starts part-way through the year, the minimum is reduced in proportion to the days remaining. If it starts on or after 1 June, no minimum applies for that first year.
What happens if I don’t withdraw the minimum pension amount?
The pension is treated for tax purposes as having ceased at the start of the financial year. Payments are treated as lump sums, the earnings supporting the pension lose their tax-free status for the year, and a new pension must be started. Limited relief is available for small shortfalls caused by honest mistakes.
Do lump sum withdrawals count towards the minimum?
Only if they are pension payments. Since 1 July 2017, partial commutations, where part of the pension is converted to a lump sum, do not count towards the minimum. Any partial commutation must be made in addition to the required minimum pension payments.
Can I withdraw more than the minimum?
Yes. There is no maximum for a standard account-based pension. The exception is a transition to retirement income stream, where withdrawals are capped at 10% of the balance each year.
When do I move to a higher minimum percentage?
Your age is assessed on 1 July each year, or on the start date of a new pension. If you have a birthday that moves you into a new age bracket during the financial year, the higher percentage applies from the following 1 July.
What happens to the minimum if the pensioner dies?
For a reversionary pension, the minimum for that year must still be paid, with payments before and after death counting towards it. For a non-reversionary pension that ends on death, the pension is still treated as compliant for the year even if the full minimum had not been paid.
General advice warning. This article contains general information only and does not take into account your objectives, financial situation or needs. Minimum drawdown rates, pension standards and tax rules are subject to change. Figures are current as at October 2026. Examples are illustrative only. SMSF trustees should confirm their obligations with their fund administrator or tax agent. You should consider whether the information is appropriate for you and seek personal financial advice before acting on any of it. Money Path Pty Ltd is a Corporate Authorised Representative (No. 001306822) of Australia National Investment Group, AFSL 522028.
