What is a retirement income stream from superannuation?

An income stream allows retirees to access the money they have saved in their super fund across several years, instead of in one lump sum. This steady income is similar to getting a salary, with the added benefit of being tax-free for people over 60. 

To create an income stream, you need to move your superannuation funds into an income stream account. The amount you receive and the frequency of the payments will be determined based on how much money you used to open that account.

To open a retirement income stream from superannuation, you need to meet at least one of the following criteria: 

• You have permanently retired or reached the preservation age at which you can access your super funds. 
• You have left your job or stopped working on or at the age of 60. 
• You are 65 years or older.
• You have a condition of release approved by your super fund, for example, you’re permanently disabled and are unable to work.

There are typically two types of superannuation income streams you can choose from; account-based and non-account-based.  

Account-based income streams:

Under this income stream, you receive payments from a super fund that is held in your name. You can define the amount and frequency of the payments, provided they meet certain caps. You will keep receiving payments as long as there is money in your super fund. 

Non-account based income streams:

A non-account-based income stream doesn’t need a super account that is attributed to you. Instead, you can withdraw the funds in your super or use other savings to buy an annuity, and this is then used to provide you with a regular income for either your life expectancy or a fixed term. The payments under this model are usually in monthly, quarterly, half-yearly or yearly plans.

You might have made some plans or have some dreams you wanted to fulfill after you retire, like going on an overseas holiday or buying a new car. In this case, you can withdraw some money out of your superannuation fund in a lump sum, and then transfer the remaining funds into an income stream. 

Even after you create an income stream and are receiving regular payments, you can make withdrawals on top of these amounts whenever you want. Usually, there are no additional costs for these extra withdrawals.

Both account-based and non-account-based superannuation income streams follow these payment norms. 

• A minimum amount will be paid at least once every year. 
• There is usually no limit on the annual payment amount and the amount that you want to receive regularly can be determined solely on the amount of savings you have in your super fund. 
• After the death of a member, the income stream cannot be paid to a non-dependent beneficiary. 

Under an account-based income stream, you can’t have any money leftover - or a residual capital value -  on termination. On the other hand, you may have a residual capital value on termination in a non-account-based income stream.