Does a defined benefit pension count for the Age Pension?
By George Iacovou, Principal Financial Adviser · Age Pension guides · Updated September 2026 · 9 minute read
The short version
- Centrelink treats a defined benefit pension very differently from ordinary super. It is left out of the assets test, and for non-military pensions at least 90% of each payment counts as income.
- The deductible amount that Centrelink leaves out of the income test has been capped at 10% of the gross payment since 1 January 2016. Military defined benefit pensions, such as DFRDB and MilitarySuper, are not subject to that cap.
- A QSuper Standard Defined Benefit account pays out as a lump sum at retirement. While that money stays in super, it is counted like other super once you reach Age Pension age. Income accounts and Lifetime Pensions follow their own rules.
- Commuting a pension, rolling a lump sum into an income account or buying a Lifetime Pension each changes how the income and assets tests count that money, so it helps to understand each option before you decide.
Does my scheme pay a pension or a lump sum?
That is the question that matters for the Age Pension. Centrelink treats a defined benefit pension and a lump sum very differently, and some schemes offer a mix. A defined benefit pension is not counted in the assets test and is assessed under the income test. A lump sum is assessed according to where the money goes.
Public sector schemes are often all called "defined benefit", but for the Age Pension what counts is what the scheme actually pays you.
A defined benefit pension is a regular payment set by a formula, usually for life. Services Australia's list of income streams includes "defined benefit pensions paid from public sector superannuation schemes and private sector defined benefit funds".
Show the full workingHide the working
How schemes pay differs:
The CSS generally pays a pension.
PSS benefits are generally paid as a lump sum, with a pension option in most cases.
DFRDB and MilitarySuper can pay lifetime pensions.
Queensland's closed State Super and Police Super schemes provided a defined pension or lump sum.
The QSuper Standard Defined Benefit account sets your benefit as a multiple of your final salary and pays it out as a lump sum at retirement.
If you are not sure which you hold, your latest statement or your fund will tell you whether you receive a pension or hold a benefit that will be paid as a lump sum. Our QSuper defined benefit guide explains how the Standard Defined Benefit account works.
How does Centrelink count a defined benefit pension?
It is not counted in the assets test. Under the income test, Centrelink counts the gross payment less a deductible amount, and for non-military defined benefit pensions that deductible amount is capped at 10% of the gross payment.
Assets test. Services Australia states it plainly: "Defined benefit and military invalidity pension income streams don't count in the assets test."
Income test. For defined benefit income streams, Services Australia assesses "the gross payment less the deductible amount". Your super fund works out the deductible amount, which is also the tax-free component of the income stream.
Show the full workingHide the working
The 10% cap. From 1 January 2016, the deductible amount that can be left out of the income test for a non-military defined benefit pension is capped at 10% of the gross payment. In practice, at least 90% of the pension counts as income.
How the cap works, illustration only. Say a defined benefit pension pays $40,000 a year and the fund's tax-free component is $6,000 a year. The deductible amount is capped at 10% of $40,000, which is $4,000. Centrelink therefore counts $36,000 a year as income, not $34,000. The figures are invented to show the mechanics; your fund's figures and your other income decide your actual position.
That assessed income is added to any other income you and your partner have, including deemed income from financial assets such as bank accounts, shares and most account-based pensions. The free areas and cut-off points are in our Age Pension income and assets test guide. Free areas are indexed each July, and the cut-off points also move when pension rates change in March and September.
Are military defined benefit pensions treated differently?
Yes. The 10% cap on the deductible amount does not apply to military defined benefit income streams, so where the fund's deductible amount is more than 10% of the payment, more of the pension is left out of the income test.
Services Australia: "The cap doesn't apply to military defined benefit income streams." The change from 1 January 2016 excluded the military schemes: the Defence Force Retirement and Death Benefits Scheme (DFRDB), the Military Superannuation and Benefits Scheme (MilitarySuper) and the older Defence Forces Retirement Benefits (DFRB) scheme.
Military invalidity pensions follow their own rule. Services Australia assesses the gross payment less a special reduction amount, and that amount is not capped at 10% unless the invalidity pension is not related to military service. Like defined benefit pensions, military invalidity pensions do not count in the assets test.
What if my defined benefit is paid as a lump sum?
Super that is not paying a pension is not counted until the person who holds it reaches Age Pension age. After that, super counts as an asset with deemed income. Once the benefit is paid out, it is assessed according to where the money goes.
Services Australia sets out the rules for super in general:
Under Age Pension age. Super held by you or your partner is not counted in the income and assets tests while that person is under Age Pension age, as long as the fund is not paying them a pension.
From Age Pension age. Super is counted in the assets test at "the balance on your latest statement", and in the income test under the deeming rules. This applies to a partner who has reached Age Pension age even if they are not getting a payment.
Show the full workingHide the working
The value of a defined benefit interest that has not yet been paid is worked out by a formula rather than being a simple account balance, and Services Australia's super page does not say which figure it uses. If you are over Age Pension age and still hold a defined benefit account, ask your fund or a Services Australia Financial Information Service Officer which value applies. Services Australia also notes that if you are unable to access your super, you may be able to have it exempted from both tests.
When a QSuper member retires, the defined benefit lump sum is first transferred to an Accumulation account. From there it can stay in super, be withdrawn, or be used to open a Retirement Income account, a Lifetime Pension or both. Services Australia puts the withdrawal point simply: "Taking money out of superannuation doesn't affect payments from us. But what you do with the money may." Money put in the bank, for example, is counted.
The two income options are assessed very differently:
| Option and test | How it is treated |
|---|---|
| Retirement Income account: assets test | The current balance counts |
| Retirement Income account: income test | Deemed income on the balance |
| Retirement Income account: access to the money | Withdrawals can be made from the account |
| QSuper Lifetime Pension: assets test | A minimum of 60% of the purchase price counts, dropping to a minimum of 30% at the step-down date described in the next question |
| QSuper Lifetime Pension: income test | 60% of each payment counts as income |
| QSuper Lifetime Pension: access to the money | No access after the six-month cooling-off period, except that a terminal medical condition may allow access under money-back protection, up to the capital access schedule limit |
Sources: Services Australia, Income streams, page last updated 26 May 2026; QSuper, Lifetime Pension and the Age Pension.
Account-based pensions started on or after 1 January 2015 are treated as financial assets and deemed. So are older ones, unless you have received a pension or allowance from Services Australia without a break since 31 December 2014. Deeming rates change from time to time; the current rates are in our Age Pension rates guide.
The Lifetime Pension's partial assessment can mean a higher Age Pension for some people. It also means giving up access to that capital. QSuper says the product has money-back protection, so at least the purchase price is paid out in payments or as a death benefit, up to a legislated limit known as the capital access schedule, but that does not give you access to the money. Whether that suits you depends on your age, your partner's position and what else you own. Our QSuper guide covers the product itself in more detail.
How does the QSuper Lifetime Pension count?
A Lifetime Pension bought from 1 July 2019 is assessed under the lifetime income stream rules. Sixty per cent of each payment counts as income. A minimum of 60% of the purchase price counts as an asset, dropping to a minimum of 30% later in life.
The rules apply to lifetime income streams purchased on or after 1 July 2019 where the payments continue for your lifetime. QSuper's Lifetime Pension can be started between the ages of 60 and 80.
Assets test. Services Australia assesses a minimum of 60% of the purchase price from the assessment day. That drops to a minimum of 30% on what Services Australia calls the threshold day, which it describes as "either: your 84th birthday [or] a minimum of 5 years from the assessment day". QSuper explains the age as the life expectancy of a 65-year-old man, with a minimum of five years at 60% first, and that life expectancy figure is updated from time to time. Some products with higher surrender or death benefit values can be assessed above those percentages. Services Australia or your provider can confirm the step-down date for your own purchase.
Show the full workingHide the working
Income test. Once payments start, 60% of the gross payments count as income. If the income stream is bought with super money, it does not count in the income test until payments start.
The partial assessment is one factor among several when retirees compare a Lifetime Pension with an account-based pension. The money is committed for life and payments can move up or down each year, so the right mix is a question about your whole position.
What happens if I commute a defined benefit pension?
Where a scheme allows it, taking a lump sum in place of some or all of a pension changes how that money is assessed. The lump sum is assessed according to where it goes, and any remaining non-military pension is still assessed on at least 90% of its payments. Age Pension recipients must tell Services Australia within 14 days.
Commutation options depend on the scheme's rules and on super law. Some schemes let you choose a lump sum, a pension or a mix when you claim your benefit, and once a lifetime pension starts it generally cannot be commuted. A temporary relaxation lets fund rules allow some legacy retirement products to be fully commuted until 6 December 2029, but it does not change a fund's rules itself. For lifetime pensions it applies only where the fund is not a defined benefit fund, is a self-managed fund, or was a small APRA fund when the pension started and at all times before that, so a lifetime pension paid by any other defined benefit fund is outside it.
For the Age Pension:
Money left in the pension stays out of the assets test, and at least 90% of the payments count as income unless it is a military pension.
A lump sum is assessed by where it goes. In the bank, in super once you are over Age Pension age or in an account-based pension, it counts as an asset and is deemed. A Lifetime Pension is assessed under its own rules.
Whether that shift helps or hurts depends on your whole position, including which test currently sets your pension. Check with your scheme first, because a pension you give up may not be available again.
The 14-day rule. Services Australia requires Age Pension recipients to tell it within 14 days if they take a partial or full commutation of an income stream, buy a new income stream, or an income stream closes. If you don't, you may be overpaid and have to pay it back.
Where people usually stand
Receiving a defined benefit pension
The pension itself is not counted in the assets test. For non-military pensions the income test counts at least 90% of the payments; for DFRDB and MilitarySuper pensions the deductible amount is not capped. What matters is how your other income and assets compare with the free areas and cut-off points.
Holding a QSuper Standard Defined Benefit account
The account is not counted while you are under Age Pension age and it is not paying a pension. The choices that change your Age Pension position come when the benefit is paid and you decide where the money goes.
Weighing a Lifetime Pension
The 60% and 30% assessment can lift the Age Pension for some people, in exchange for giving up access to that capital. It is a whole-of-household decision, and your partner's age and super are part of it.
Common questions
Is a defined benefit pension counted as an asset for the Age Pension?
No. Services Australia does not count defined benefit pensions or military invalidity pensions in the assets test. The pension is assessed under the income test instead.
How much of my defined benefit pension counts as income?
Centrelink counts the gross payment less a deductible amount worked out by your fund. For non-military defined benefit pensions the deductible amount is capped at 10% of the gross payment, so at least 90% of the pension counts as income.
Does the 10% cap apply to DFRDB or MilitarySuper pensions?
No. The 10% cap does not apply to military defined benefit income streams. Military invalidity pensions are assessed on the gross payment less a special reduction amount, which is not capped at 10% unless the pension is not related to military service.
Is my QSuper defined benefit account counted before I reach Age Pension age?
Not while you are under Age Pension age and the fund is not paying you a pension. From Age Pension age, super is counted as an asset and income is deemed on it. Ask your fund or Services Australia which value applies to a defined benefit account that has not yet been paid.
How does the QSuper Lifetime Pension affect the Age Pension?
It is assessed under the lifetime income stream rules. Sixty per cent of each payment counts as income. A minimum of 60% of the purchase price counts as an asset, dropping to a minimum of 30% on the threshold day. Services Australia describes that day as your 84th birthday or a minimum of 5 years from the assessment day, and Services Australia or your provider can confirm the date for your purchase.
Do I need to tell Centrelink if I commute my pension?
Yes. Age Pension recipients must tell Services Australia within 14 days if they commute part or all of an income stream, buy a new one, or an income stream closes. Late notice can lead to an overpayment you have to repay.
Sources: Services Australia, Income streams (Age Pension), page last updated 26 May 2026, and Superannuation (Age Pension), both read 14 September 2026; QSuper, Lifetime Pension and the Age Pension and The Age Pension and Super, read 14 September 2026; ATO, Relaxed commutation rules for legacy retirement products, read 14 September 2026; QSuper Lifetime Pension adviser guide, current as at 1 July 2025, read 14 September 2026; QSuper Defined Benefit Account Guide, Department of Finance CSS and PSS pages, DVA DFRDB and Australian Government Actuary MilitarySuper material, checked 28 July 2026; DSS Social Security Guide 4.9.2.30 and 4.2.1.10, via search summaries.
Great Advice is not affiliated with, or endorsed by, QSuper, Australian Retirement Trust, CSC or any other superannuation fund. This is general information only and does not consider your objectives, financial situation or needs. Before acting on it, consider whether it is appropriate for your circumstances. George Iacovou is an authorised representative of Akumin Financial Planning Pty Ltd, AFSL 232706.
