Why a large super balance can actually reduce your retirement income

March 21, 2026 — 5:01am

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People with low to medium super balances often feel like they’re on the outer when it comes to retirement. They look at people with $1 million or more in super and assume those are the people who get to enjoy the ‘epic’ version of retirement, while everyone else just scrapes by.

But that is not how the Australian retirement system actually works.

One of the quirks of the system is that there is a sweet spot where super and the age pension combine very efficiently. In some cases, someone with a moderate level of savings can end up with almost the same income, or even more income, than someone with much higher savings, simply because they still qualify for a far more meaningful slice of the pension.

That sweet spot has shifted again from March 20 because the age pension goes up. And we are not only seeing the standard indexation of the caps, we are also seeing our second rise to the deeming rate in a year.

That changes where the age pension and super combine to give someone with less, more income from the combination of super and the pension, at the same drawdown rate.

The thing to understand is that the sweet spot is not one fixed number for every retiree. It depends on how your assets are structured. The age pension has two key sets of limits. There are thresholds where you qualify for the full pension, and then higher levels where the pension cuts out altogether.

Retirement income in Australia is layered. The amount you have in super matters. The amount you qualify for from the age pension does, too.

For example, at March 20, a single home owner can receive the full age pension with assets up to about $321,500, while a home owner couple can have up to about $481,500. Above those levels the pension doesn’t stop, it gradually reduces as your assets increase.

That’s called tapering. For every $1000 above the assets test threshold, your pension reduces by $3 a fortnight. That tapering is where the magic happens. It’s what allows super and the age pension to overlap and work........

© The Age