Why timing matters: unlocking Age Pension outcomes through pre‑retirement income design

Tech Corner

For many clients, the difference between missing out on the Age Pension and receiving a meaningful benefit can come down to one critical factor: timing.

While advisers often focus on retirement as the decision point, the most effective strategies are increasingly being implemented years earlier, well before a client stops working. By combining a pre-retirement investment with deferred lifetime income, advisers can help clients unlock favourable means test outcomes and improve their long-term retirement income.

A different way to think about the Age Pension

The Age Pension is not just a safety net. It is a valuable and often under-optimised income stream.

Yet many clients unintentionally disqualify themselves, particularly under the assets test, where even modest differences in asset positioning can significantly impact entitlements.

This is where lifetime income streams offer a powerful advantage:

Only 60% of income payments are assessed under the income test
Only 60% of the purchase amount is assessed under the assets test where the product meets Capital Access Schedule (CAS) requirements. From age 85, or after a minimum of 5 years, this further reduces to 30%

These investments can reduce assessable assets, potentially providing earlier Age Pension eligibility or boost an existing entitlement.

Move from a retirement decision to pre‑retirement strategy

Historically, lifetime income solutions were considered at retirement. Today, that approach risks missing a key opportunity as modern product design enables clients to:

Invest for a future lifetime income stream while still in the accumulation phase
Defer income commencement until a later date, and
Decide later whether to activate Age Pension-friendly settings.

This changes the advice conversation entirely. Rather than reacting at retirement, advisers can position clients early, allowing:

Investment growth before assessment
Greater flexibility in decision-making, and
More control over final Age Pension outcomes.

Importantly, superannuation assets in accumulation phase are generally not assessed before Age Pension age, meaning early positioning comes with no immediate social security trade-off.

Case study: when starting earlier changes the outcome

At age 60, Rachel is still working, has built a solid super balance, and plans to retire at 67. On paper, she appears well prepared but there is a challenge.

Based on projections, Rachel is likely to sit just above the Age Pension assets threshold, meaning she could miss out on a valuable income stream in retirement.

Rather than waiting until retirement to act, her adviser takes a more proactive approach.

Her adviser recommends a $150,000 allocation of Rachel’s super into Allianz Guaranteed Income for Life (AGILE) and defers lifetime income commencement. In the meantime, her investment remains market-linked, giving it the opportunity to grow, while also benefiting from built-in downside protection designed to reduce the impact of market falls.

Over the next five years, Rachel continues working while her investment participates in market performance.

The decision point: age 65

At age 65, Rachel meets a condition of release, creating a key planning checkpoint.

At this point, her adviser revisits her projected retirement position. Rachel is still expected to sit close to the Age Pension cut-off in the future, so they make a strategic decision to activate the product’s Age Pension-friendly structure.

This decision is critical because it determines how the investment will be assessed in future.

Rather than relying on the market value at retirement, Centrelink uses a measure known as the “purchase amount.” This is based on Rachel’s initial $150,000 investment, compounded over time using prescribed upper deeming rates up to the age at which she commences her lifetime income.

Importantly, this means the relevant value for means testing is locked in at this point, and any withdrawals or death benefits are subject to maximums prescribed by the Capital Access Schedule.

From age 65 to retirement

Over the next two years, Rachel continues working and her investment remains exposed to market movements.

By age 67, when she retires, the market value of her investment has increased further. For example, to around $166,000.

However, this higher balance is not the amount used for Age Pension assessment.

The Age Pension outcome

Because Rachel elected the Age Pension-friendly structure at age 65, her investment is assessed using the previously determined purchase amount, not the current market value at age 67.

Under the rules, only 60% of this purchase amount (equal to $105,607) is included under the assets test instead of $166,000.

Flexibility without compromise

One of the key barriers to using lifetime income strategies historically has been loss of flexibility. Today, that constraint has evolved with some solutions allowing advisers to separate:

When a client invests
When income starts, and
When (or if) social security concessions are activated

This gives clients the ability to:

Secure future income early
Maintain access and flexibility during working years, and
Make an informed decision at 65 or earlier retirement, when their circumstances are clearer.

For advisers, this means less need to “lock in” outcomes prematurely and more optionality to tailor strategies as client needs evolve.

Where this strategy makes the biggest difference

The greatest impact is often seen in clients who:

Sit near the Age Pension assets threshold
Are within 5–15 years of retirement
Value a combination of income certainty, flexibility, and improved social security outcomes

For these clients, small structural changes can produce larger benefits over time.

Take a more proactive approach to retirement income

Earlier planning adds strategic value. By moving the conversation forward, advisers can:

Position assets to take advantage of favourable means testing
Allow the purchase amount to grow before assessment
Activate concessions when they matter most; and
Improve total retirement income outcomes, not just portfolio performance, without taking on additional risk.

In many cases, this transforms the Age Pension from an uncertain outcome into a deliberate and valuable component of the retirement strategy.

As client portfolios approach retirement, the window to more effectively influence Age Pension outcomes begins to narrow. Now is the time to review your pre‑retirement clients—particularly those near Age Pension thresholds—to identify where an AGILE strategy could enhance outcomes.

Conclusion

Early planning and a well-designed lifetime income solution such as AGILE can unlock enhanced Age Pension results for many clients.

By investing in AGILE ahead of retirement and carefully timing the start of the lifetime income and the election of Age Pension+, advisers can help clients benefit from favourable means test rules that either increase or enable Age Pension payments earlier. That means more total retirement income, greater longevity protection, and better use of available social security support – simply by recognising why timing matters.

Got a technical or super related question?

Our Technical Services specialists have all the answers – email the Technical Team your question.

This material is issued by Allianz Australia Life Insurance Limited, ABN 27 076 033 782, AFSL 296559 (Allianz Retire+). Allianz Retire+ is a registered business name of Allianz Australia Life Insurance Limited. This information is current as at June 2026 unless otherwise specified and is for general information purposes only. This information has been prepared specifically for authorised financial advisers in Australia and is not intended for retail investors. It does not take account of any person’s objectives, financial situation or needs. Before acting on anything contained in this material, you should consider the appropriateness of the information received, having regard to your objectives, financial situation and needs. The returns on the Allianz Guaranteed Income for Life (AGILE) product are subject to a number of variables including investor elections, market performance and other external factors, and may differ from the information contained herein. Past performance is not a reliable indicator of future performance. No person should rely on the content of this material or act on the basis of anything stated in this material. Allianz Retire+ and its related entities, agents or employees do not accept any liability for any loss arising whether directly or indirectly from any use of this material. Use of the word ‘guarantee’ in this material refers to an assurance that certain conditions or contractual promises will be fulfilled by Allianz Retire+ from the available assets of its Statutory Fund No 2, in relation to the product terms. This includes ‘guaranteed’ income payments in the Lifetime Income Phase which will be paid from the available assets of Statutory Fund No 2, noting that Allianz Retire+ may terminate the product in certain limited circumstances as outlined in the Product Disclosure Statement referred below. Allianz Australia Life Insurance Limited is the issuer of Allianz Guaranteed Income for Life (AGILE). Prior to making an investment decision, investors should consider the relevant Product Disclosure Statement (PDS) and Target Market Determination (TMD) which are available on our website (www.allianzretireplus.com.au).

Any information on this website does not take into account your objectives, financial situation or needs. For personal financial advice please speak to your financial adviser. Products will be issued by Allianz Australia Life Insurance Limited, ABN 27 076 033 782, AFSL 296559.

Allianz Retire+ is the business name of Allianz Australia Life Insurance Limited. By using this website you agree to access this Financial Services Guide.