Minimum Super Withdrawal: Rules & Superannuation Pension Drawdown Rates

When you use your superannuation to start a retirement income stream, you are required to make a minimum withdrawal from this super pension each financial year.

The minimum withdrawal amount is determined by your account balance and age. But there’s a few other things to consider, too.

Minimum Super Withdrawal

When your superannuation is in accumulation phase, you are not required to make any withdrawals from your account, even if you are retired. However, once you use some or all of your accumulation balance to start an account based pension, you must withdraw a minimum level of pension income each year.

The minimum drawdown from a superannuation pension income stream for the 2021/2022 financial year is calculated by multiplying your pension balance by the minimum drawdown rate.

Superannuation Drawdown Rates

The minimum superannuation pension drawdown rates are based on your age, as shown in the table below. You will also notice there is a temporary relief in the 2021/2022 and 2022/23 financial years on the minimum amount to be withdrawn. This 50% reduction measure was implemented by the Government due to Covid-19 to alleviate the pressure of withdrawing more than required from super, given the impact that the pandemic had on some asset values and earnings within super.

AgeStandard Minimum Percentage FactorReduced Minimum Percentage Factor (2020 - 2023 FY inclusive)
Below Age 654%2%
65 - 745%2.50%
75 - 796%3%
80 - 847%3.50%
85 - 899%4.50%
90 - 9411%5.50%
Age 95 and above14%7%

Pension Drawdown Rules

There are a few rules to consider when calculating the superannuation pension minimum withdrawal amount.

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Calculation Date

The date of the calculation to determine the minimum pension dollar amount is by multiplying your 1 July pension balance by the minimum percentage factor, above. This is then recalculated on 1 July of each subsequent financial year. Should you commence an income stream part-way through the year, then the minimum pension amount is calculated based on the capital amount used to commence the pension and then each subsequent 1 July.

Frequency

The minimum account based pension calculation is done once per financial year and applies for the whole of the financial year. The frequency of pension payments does not impact the minimum pension amount. Whether you receive pension payments fortnightly, monthly, half-yearly or once per year (or any other frequency), the minimum amount to be withdrawn for the year will remain the same.

50% Reduction

The temporary minimum pension factor 50% reduction is expected to finish at the end of the 2022/2023 financial year. That is, from 1 July 2023, the minimum pension factor will return to the standard payment rates.

Pro-rata

If you start a pension income stream part-way through a financial year, you are not required to withdraw the full minimum pension amount from your superannuation income stream.

The minimum pension drawdown for a year where you commenced the pension part-way through the year is calculated as pro-rata, based on the pension starting value, multiplied by the minimum pension percentage factor, multiplied by the remaining days in the financial year (from the date the pension commenced), divided by days in the year.

Minimum Pension = (Pension Purchase Price x Pension Factor) x (days remaining in financial year divided by days in FY)

Close pension

If you close down a pension income stream or commute it part-way through a year, you will need to ensure that the minimum required pro-rata pension payment is still satisfied prior to the pension being closed.

Rounding

When calculating the minimum pension payment, based on the account balance multiplied by the minimum percentage factor, the amount arrived at is rounded up or down to the nearest $10, with anything five or above rounded up.

Minimum Pension Withdrawal Example

Here’s a few examples of how the superannuation pension minimum withdrawal is calculated.

If you start a new income stream at age 64 on 1 July 2022 with $500,000, then your minimum pension amount would be calculated as:

Minimum pension = $500,000 x 4% = $20,000

You would need to withdraw a total of $20,000* in pension payments throughout the 2022/2023 financial year.

Let’s say you, instead, began the pension at age 64 on 1 August 2022, using $500,000. The minimum pension would be calculated as:

Minimum pension = ($500,000 x 4%) x (334 divided by 365) = $18,301 ($18,300* after rounding to the nearest $10).

What if you began the pension at age 71 with $425,000 on 1 January 2023? Then the calculation would be:

Minimum pension = ($500,000 x 5%) x (181 divided by 365) = $12,397 ($12,400* after rounding to the nearest $10).

*This amount would then be halved due to the 50% reduction drawdown relief measures.

SMSF Minimum Pension

The minimum pension payment for an account based pension held within a self managed superannuation fund (SMSF) is calculated in the same manner as detailed above.

It is the responsibility of the SMSF trustees to ensure that the minimum pension standards are satisfied each financial year.

Minimum Pension Withdrawal Calculator

You can use the calculator below to determine the minimum amount of pension to be drawn each year, based on your age and account balance.

The minimum drawdown rates for a superannuation pension are designed to force retirees to spend their retirement savings, or at least reduce the amount invested in the tax-free pension phase of superannuation. If you do not require superannuation pension income in order to cover living expenses, you might consider contributing the pension payments back into superannuation (if eligible due to age and contribution cap limits), or commuting your pension back to accumulation phase. However, it should be noted that earnings from investments within the accumulation phase are taxed at 15%, compared to 0% within the pension phase.

Watch this video on the tax you pay inside super:

So there you have it! I hope you found this article on minimum super withdrawals useful.  If you’re interested in getting help with your super and retirement plans, then click here to get in touch with the team at Superguy today.

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