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Once retired, you have the choice of retaining your funds in super (in the accumulation phase) or converting your funds to a pension, such as an allocated pension.

Taxation payments will be higher if you leave your assets in a super fund compared to a pension. In the accumulation phase, earnings on a super funds are taxed at up to 15 per cent. But once a fund converts to paying a pension, there is no tax payable on the earnings. Additionally, if you are aged over 60, any pension drawdowns are also tax free.

Let’s say that your account balance is $500,00 and generates 8 per cent ($40,000) assessable earnings. Assuming half of this is income, and the other half realised capital gains, then the tax payable would be around $5,000. If the account had been converted to the pension phase, then the tax would be nil.

One possible downside of commencing a pension is that you may not need the minimum level of income that you must draw down. For instance, you may have income from other sources, such as investments in your names or employment income.

And once a pension is commenced, it is no longer possible to add extra contributions.

The costs charged by the product provider when making the switch from accumulation to pension phase will vary, but are impossible to avoid once you’ve decided to cash in your super assets. But it is vital that you shop around when looking for a retirement income product, as fees and charges can range enormously.