Does the income withdrawn from an account-based pension reduce my Centrelink Age Pension?

Yes maybe, depending on which type of account-based pension you have, it may affect your age pension with how much you withdraw. This usually only happens though for account-based pensions commenced prior to 1st of January 2015 and are “grandfathered”.

Grandfathering provisions can be quite complicated, it is best to check with Centrelink if you already have an account-based pension to see if it is grandfathered, usually for your account-based pension to be “grandfathered”, it needs to have commenced prior to 1st of January 2015 and you must have been receiving a Centrelink payment at the same time and continue to do so.

These “grandfathered” pensions can sometimes be a bit more favourable from a Centrelink eligibility perspective. The balance is asset tested (like a normal account-based pension nowadays) however the balance isn’t “deemed” to earn an income. Rather the income drawn is assessed for Centrelink purposes less a deductible amount (which is calculated based on a formula). So sometimes drawing large amounts of income over and above the deductible amount can potentially have a reduction on your Centrelink Age Pension, likewise, drawing minimal amounts could potentially have a NIL or close to NIL affect.

For normal pensions these days though (i.e. most created after 1st of January 2015), the income drawn doesn’t affect your age pension. This is assuming you draw the income and spend it, if it doesn’t get spent and sits in your bank account, you will need to let Centrelink know. Common account-based pensions these days they asses the asset value and just look at the balance, then “deem” it to earn a certain level of income, rather than looking at what you actually draw as income or what your account-based pension actually earns as income.