At retirement (typically age 60+ from a taxed fund) you have three options for accessing super: leave it in accumulation, start an account-based pension, or withdraw it as a lump sum. The headline tax positions are: accumulation earnings taxed at 15%, retirement-phase pension earnings tax-free up to the Transfer Balance Cap ($2.0M (from 1 July 2025) for new pensions in 2025-26), and outside-super earnings taxed at your marginal rate (with CGT discount and franking credits softening the blow somewhat).

Mathematically, if you're going to draw a steady income from your super, the pension wins on tax efficiency at almost every income level. Earnings inside the pension grow without tax friction; earnings outside super get taxed each year. Over 20-30 years of retirement, that compound difference is meaningful — typically 5-15% better terminal balance in the pension scenario at moderate drawdowns.

The Centrelink interaction is the main complicator. Lump-sum withdrawals can sometimes shrink your assessable assets if you spend the money down (e.g. on home renovations — your principal residence is exempt) or contribute to a younger spouse's super (still in accumulation). For most retirees the pension wins; for some, splitting the difference (partial pension + partial lump sum for one-off needs) is optimal. This calculator shows the long-run wealth side; pair with the Assets Test Calculator for the Centrelink side.