A pension is defined as an income stream received by an individual generally upon retirement. An SMSF’s sole purpose is to provide retirement benefits to its members upon retirement i.e paying pensions.
Generally there are two types of pensions: Transition to Retirement Pension (TRIS) and Account Based Pension (ABP).
An account based pension is an income stream that supports an individual upon retirement. Usually, this is their only source of income. A condition of release must be met to be able to access the ABP income stream. The most common condition of release is retirement.
As stated above a condition of release must be met before an individual can receive a pension. Common conditions of release are:
If an individual is under 60, the individual will have to pay tax on any money received as pension. Once the individual is over 60 all pensions are tax free.