Planning for your retirement can be an exciting time. It is a time to think about new possibilities. It is also a time to think about how you will replace your income once you stop working. There are many financial decisions to make that will influence your future lifestyle choices. And now, with recent changes to legislation, there is a greater range of financial products available to retirees.

One of the newest options to help retirees generate an income stream is a growth pension.

What is a growth pension?

Growth pension is a term used for a new type of ‘complying’ retirement income stream. You may have heard other terms like complying market linked income stream and term allocated pension (TAP) used. These ‘complying’ retirement income streams can only be purchased with a lump sum from a superannuation fund.

How does it work?

An investment account is set up with superannuation money from which you receive a regular income, for a fixed term based on your age and account balance. The amount of pension payments made each year is based on a formula prescribed by the Government.

With a growth pension, the value of the account may increase or decrease depending on the performance of the investments selected, as well as benefit payments and fees that have been charged to the account. The income stream will continue for a fixed term as long as there is money in the account.

Growth pensions also offer investment choice – you have the flexibility to choose and manage your own underlying investments, such as managed funds and shares. The different investment products carry different levels of risk and, potentially different levels of return. This makes it vital to seek personalised, professional advice.