What is the Accumulation Phase of Super?

The accumulation phase of superannuation is the time period in which you accumulate wealth to spend in retirement.

The accumulation phase of super is generally the longest-lasting phase of superannuation; in this phase you add to your superannuation account, building a nest egg with which to retire. This is in contrast to the retirement phase, where you draw from your savings to fund your retirement.

The accumulation phase lasts from when you first start earning superannuation, until you either move to a retirement income stream or withdraw your savings as a lump sum. Simply reaching a condition of release, like retiring after you reach the preservation age, does not necessarily mean that you have left the accumulation phase. A transition to retirement pension phase will also be classified as being in the accumulation phase until you reach a condition for release.

Tax during the accumulation phase

While in the accumulation phase, you will generally build you super fund through mandatory super guarantee contributions, any optional contributions you choose to make and earnings made on the investment of your existing savings. According to Australian Taxation Office, while in the accumulation phase, you will generally still have to pay tax on any earnings your investments make, at a maximum rate of 15%.

Transferring your money out of the accumulation phase

When transitioning from the accumulation phase to the retirement phase, you are limited in how much money you can move by the transfer balance cap, which the ATO currently set to $1.6 million. Amounts in excess of this cap have to remain in the accumulation phase. You can also choose to transfer less than this, with the option to move more at a later date. However, you will still be unable to exceed the transfer balance cap. If you have fulfilled a condition for release and have funds still in the accumulation phase, you may be able to withdraw these as a lump sum, instead of as an income stream.

For more on superannuation, and to compare super funds from across the country, click here.

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