The most common pension is an account based income stream, which will pay you a regular income. A minimum amount must be taken each year but there is no maximum limit. This income stream was previously referred to as an ‘allocated pension’.
If you are under age 60, the tax free component of the income payment is paid tax free, while the taxable component is taxed at your marginal tax rate with a 15% pension offset made available (in circumstances where you are over your preservation age or the pension is paid due to disability or death).
If you are over age 60 the total income payment is completely tax free regardless of the underlying components.
The above relates to income streams paid from a taxed superannuation fund.
If, however, a pension is paid from an untaxed superannuation fund (generally public sector superannuation schemes that have not paid the 15% contributions tax), the tax treatment for the taxable component is higher and continues to be taxable after age 60 but with a 10% tax offset.