- Home
- DIY Resources
- Cashflow in Retirement
- Accessing Your Super
- Term & Restricted Pensions
Term Pensions & Restricted Pensions
Understanding complying pensions, market-linked pensions, and their Centrelink advantages.
While most Australians use account-based pensions for their retirement income, there's another category of super pensions with very different characteristics: term pensions and restricted pensions. These products trade flexibility for guaranteed income and potential Centrelink advantages.
If you have one of these products — or are wondering whether the newer "innovative income stream" products are right for you — this guide explains how they work and what makes them different.
What Makes a Pension "Restricted"?
The key characteristic of restricted pensions is that they are non-commutable — meaning you cannot convert them back to a lump sum. Once you start the pension, you're locked in for the term (or for life). This is fundamentally different from account-based pensions, where you can withdraw lump sums anytime.
🔑 Key Restrictions
- No commutation: Cannot convert to a lump sum (except in very limited circumstances)
- Fixed payments: Income amount determined by formula or contract, not your choice
- Set term: Payments continue for a fixed period or life expectancy (not until balance runs out)
- Limited flexibility: Cannot change payment amounts at will
- Reduced death benefits: May provide little or nothing to beneficiaries at death
Types of Term & Restricted Pensions
📅 Term Allocated Pension (TAP)
Legacy ProductPays income for a fixed term based on life expectancy at commencement. Cannot be started after 19 September 2007.
- Term set at start (e.g., 15-25 years)
- Payments calculated annually
- Balance reduces over term
- Any residual goes to beneficiaries
📈 Market-Linked Pension (MLP)
Legacy ProductSimilar to TAP but payments linked to investment performance. Cannot be started after 19 September 2007.
- Payments vary with returns
- Fixed term structure
- Non-commutable
- Less common than TAP
♾️ Lifetime Complying Pension
Legacy ProductPays income for life. Very few still exist. Cannot be started after 19 September 2007.
- Guaranteed income for life
- Payments set by formula
- Non-commutable
- Little/no death benefit
🆕 Innovative Income Streams
Available NowNew products (from 1 July 2019) that meet government requirements for favourable Centrelink treatment.
- Lifetime annuities meeting criteria
- Deferred lifetime annuities
- Group self-annuitisation products
- Must pool longevity risk
The Centrelink Advantage
The main reason these restricted products exist (and why new "innovative income streams" have been created) is their favourable Centrelink treatment. This can significantly increase Age Pension payments compared to holding the same amount in an account-based pension.
💜 How Centrelink Treats Different Pensions
| Pension Type | Assets Test | Income Test |
|---|---|---|
| Account-Based Pension | 100% of balance counted | Deeming rules apply |
| Pre-2015 ATE Pensions (Asset-Test Exempt, started before 1 Jan 2015) | Fully exempt from assets test | Actual income minus deductible amount |
| Post-2015 Complying Pensions (Started 1 Jan 2015 – 30 Jun 2019) | 100% of balance counted | Actual income minus deductible amount |
| Innovative Income Streams (From 1 July 2019) | 60% of purchase price counted (reducing over time) | Actual income minus deductible amount |
Example: The Centrelink Difference
Robert, a single homeowner, has $400,000 to invest. Let's compare:
Option A: Account-Based Pension
- Assets test: $400,000 counted
- Income test: Deemed at approximately $8,800/year
Option B: Qualifying Lifetime Annuity (Innovative Income Stream)
- Assets test: $240,000 counted (60% of $400,000)
- Income test: Actual annuity payments minus deductible amount
The $160,000 reduction in assessed assets could increase Robert's Age Pension by approximately $4,000-5,000 per year — a significant boost to his retirement income.
Legacy Product Rules: A Brief History
Term and lifetime pensions could be started with full Centrelink assets test exemption. These products were common in the retirement landscape.
New complying pensions (TAPs, MLPs, lifetime pensions) could no longer be started. Account-based pensions became the default.
New complying pensions started after this date would not receive assets test exemption (but existing ones retained it).
New category of products with partial assets test concession (60%) — reviving some Centrelink advantages for lifetime products.
If You Have a Legacy Product
If you already have a term allocated pension, market-linked pension, or lifetime complying pension that started before 2015, you may have valuable asset-test exempt status. This is worth protecting.
⚠️ Don't Accidentally Lose Asset-Test Exemption
If you commute (cash out) an asset-test exempt pension — even partially — you generally cannot restart it with the same exemption. Once gone, it's gone forever. Be very careful before making changes to legacy products, and seek professional advice.
What Happens When a Term Pension Ends?
For term allocated pensions and market-linked pensions:
- At end of term: The pension stops. Any remaining balance (if the product allows) goes to the member or their beneficiaries.
- If member dies: Depending on the product, the balance may transfer to a reversionary beneficiary, be paid as a death benefit, or be forfeited.
- Converting to account-based: When a term pension ends, you may need to convert any remaining balance to an account-based pension or withdraw as a lump sum.
💡 Planning Ahead
If your term pension is approaching its end date, start planning early. You'll need to decide what to do with any remaining balance, and this may affect your Centrelink position if you currently have asset-test exemption.
Innovative Income Streams: The Modern Alternative
Since 1 July 2019, the government has allowed a new category of products — innovative income streams — that receive partial Centrelink concessions. These are designed to encourage retirees to take lifetime income products that reduce longevity risk.
To Qualify, Products Must:
- Provide income for life (or a very long term)
- Pool longevity risk (not just individual life expectancy)
- Be non-commutable (can't convert to lump sum)
- Meet specific regulatory requirements
Examples Include:
- Lifetime annuities from life insurance companies that meet the criteria
- Deferred lifetime annuities (payments start at a future age)
- Group self-annuitisation products (pooled longevity products)
- QSuper Lifetime Pension and similar super fund products
📋 Current Government Policy
The government's stated policy is to encourage products that:
- Provide retirement income certainty
- Protect against longevity risk (outliving savings)
- Reduce reliance on the Age Pension in later years
The 60% assets test treatment and actual income (not deeming) for innovative income streams reflects this policy direction. Future reforms may expand or refine these concessions.
Comparison: Restricted vs Flexible Pensions
| Feature | Account-Based Pension | Term/Restricted Pension |
|---|---|---|
| Flexibility | High — withdraw lump sums anytime | Low — locked in for term/life |
| Income control | Choose amount (above minimum) | Set by formula/contract |
| Centrelink assets test | 100% counted | May be exempt or reduced |
| Centrelink income test | Deeming applies | Actual income (minus deductible) |
| Longevity protection | Balance can run out | Lifetime products pay until death |
| Death benefits | Full balance to beneficiaries | May be reduced or nil |
| Investment control | You choose investments | Usually no control |
| Availability | Widely available | Limited to specific products |
Should You Consider a Restricted Product?
Restricted or term pensions may suit you if:
- Maximising Age Pension is a priority and you're near the thresholds
- You want guaranteed lifetime income and don't mind losing flexibility
- Leaving a large inheritance isn't a priority
- You worry about outliving your savings
- You're comfortable with "set and forget" income
They're likely not suitable if:
- You want access to lump sums for emergencies or opportunities
- Leaving money to beneficiaries is important
- You want control over your investments
- Your circumstances might change significantly
- You're well under Age Pension thresholds (Centrelink benefit is irrelevant)
Questions About Term or Restricted Pensions?
These products have complex rules and the stakes are high — especially if you have a legacy product with asset-test exemption.
Last updated: January 2026
Disclaimer
NOT PERSONAL ADVICE — term and restricted pensions have complex rules that have changed over time. Legacy products may have valuable protections that can be lost if changed. Always seek professional advice before making decisions about these products.