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Securing Retirement by Utilising an Innovative Retirement Income Stream 

Retirement Income Streams client case study

A Yield Client Case Study

IRIS means Pam’s super lasts until age 90, with $100,000 still remaining at that time 

Without IRIS Pam’s super runs out by age 89. 

Approx $28,173 more Age Pension, gained mostly early on in retirement. 

With IRIS, Pam should never need to rely on Age Pension alone. 

A First Glance at Pam’s Retirement Income Stream

Pam is a long-time client of Yield’s who separated and divorced from her husband in 2017. Pam is 58 years old and has a daughter who is cared for equally with her ex-husband. 

After separating, Yield Financial Advisors helped Pam revise her financial plan, showing her she could afford to buy a home that would be suitable for the long term, while remaining debt free and affording a secure retirement. We have conducted regular annual reviews with Pam since. 

In her 2022 annual review, we discussed again what was important to Pam about her retirement. We re-evaluated things with her, like when ideally she would like to retire; how much income she would need, including extra for travel and car upgrades; and what was important to her between the balance of retirement income stream security and the legacy she may leave behind.  

Throughout these conversations, Pam made it clear that she was worried about whether she would have enough for retirement. Covid had impacted a new business she had started and while she was still travelling well compared to the projections we had completed in her 2017 advice, the experience had left her feeling vulnerable.  

Pam was clear that while she wanted to leave a legacy to her daughter, it was not her overarching goal, and she would be prepared to trade some estate value to achieve a more secure retirement for her own needs.  

Considering all of this, we introduced her to the benefits of a pension product that we thought may be suitable for her, known as an Innovative Retirement Income Stream or IRIS. We talked about the potential Age Pension benefits and after discussion she was interested to see advice on how it may work for her situation and needs.  

About Innovative Retirement Income Streams (IRIS)

Given a lot of the case study for Pam is about how IRIS works for her, we’ve included a summary here of what IRIS is and how it came about. 

In 2017, Treasury and the government created a new condition of release and pension category to encourage product provides to create new and innovative solutions to the challenges retirees face. A key issue they wanted addressed was longevity risk for retirees, so retirees can feel more secure that their funds will last the distance and so they feel more confident to spend what they have worked hard to accumulate.  

While IRISs are not a new thing, they have been slow to market, which is surprising given the benefits they can provide retirees.  

At the core, an IRIS, once established as a lifetime income stream, holds a unique advantage in the eyes of the Centrelink Age Pension tests: an immediate 40% reduction in the assessed asset value. However, the potential benefits extend even further, with the prospect of attaining an entirely assets test-exempt income stream in retirement. For individuals with substantial assets but modest income, this could significantly enhance eligibility for the Age Pension. 

While IRIS may not be the ideal solution for every retiree, this case study offers a compelling example of how this innovative product can greatly compliment certain individuals’ financial plans.  

With Pam’s consent, this case study delves into the comprehensive analysis undertaken by our team of advisors to assess the suitability of IRIS for Pam, considering her unique financial goals and circumstances. 

Snapshot of Pams Financial Situation (Excluding Lifestyle Assets)

  • Income: $70,000 
  • Super balance: $529,762 
  • Other financial assets: $13,500 
  • Debt: $0 
  • Annual Expenses: $44,500 
  • Desired Retirement Income: $50,000 + $6,000 travel budget to age 75 in today’s money 

Findings From Our Analysis 

In conducting a comprehensive analysis of Pam’s financial outlook leading up to and throughout her retirement journey, several key insights emerged. Initially, modelling her financial position up to age 90 revealed that, based on her current trajectory, retaining her existing superannuation fund would likely not allow her to sustain her income needs adequately. This projection prompted a deeper exploration of alternatives. 

Upon considering the possibility of transitioning to an Innovative Retirement Income Stream (IRIS), a significant improvement was possible. Our analysis indicated that this alternative strategy would not only extend the longevity of her financial assets but also substantially enhance her financial security. With an estimated $100,904 in financial assets remaining at age 90, Pam could look forward to a more financially stable retirement. In both assessments, the investment return assumption was exactly the same.  

The crux of this difference lies in the more favourable assessment of the IRIS for Age Pension purposes, amounting to approximately $28,173 of extra age pension to age 90, with most of the advantage gained early on in retirement. Consequently, this means that Pam can comfortably meet her retirement income needs by drawing down on fewer of her own financial assets, affording her greater financial flexibility and peace of mind throughout her retirement years. 

In light of these findings, our advice for Pam was to roll over the full balance of her existing super account to an alternative IRIS fund. This Innovative Retirement Income Stream operates across three distinct phases—accumulation, deferred income stage, and full retirement stage—offering Pam a robust and tailored approach to securing her financial future in retirement.  

Importantly for Pam, rolling her super over does not obligate her to use the IRIS as an income stream at retirement. She is free to roll it over to an alternative super fund at any time, before commencing an income stream. This way we can help Pam assess the continued suitability of the IRIS for her needs and if her circumstances are different to what we project today, we can help her adjust the strategy accordingly. 


During the accumulation stage of Pam’s financial journey, her IRIS super fund functions similarly to any other superannuation accumulation account. The super fund we recommended is both cost effective compared to market and has a wide choice of investment options to choose from. Pam’s preference is for lower cost investing and the portfolio cost is approximately 1% in total or comparable to many industry funds in Australia, yet her portfolio is personally tailored for her needs and risk profile, which we regularly review with her.  

During accumulation, Pam has flexibility to transition out of the account at her discretion, with the option to roll her funds into another superannuation accumulation fund if she chooses to do so. 

Importantly, Centrelink assesses the account’s value based on a straightforward formula: Contributions + Earnings – Withdrawals. However, it’s noteworthy that Centrelink makes a unique assumption during this phase regarding the earnings on the account. Instead of considering the actual return on Pam’s account, Centrelink assumes earnings at the maximum deeming rate, currently set at 2.25%.  

Innovative Retirement Income Streams Centrelink assessable balance vs actual balance

Note the chart shows the balance while Pam is still working and the growing difference between the Actual Balance and the Centrelink Assessable Balance, which is all on account of the fund performance being greater than the deeming rate. 

At age 65, in Pam’s case, we recommended she take $350,000 to put into a standard Account Based Pension. When this happens, the assessable benefits on the amount transferred are lost, however we had determined an optimum amount which balanced a higher level of Age Pension, while giving her access to liquidity. 

This assumption means that, even if Pam’s account performs better than the deeming rate, Centrelink will calculate her account balance as lower than its actual value. This intriguing nuance underscores the potential benefits of the IRIS super fund, especially in relation to Centrelink assessments, which we will explore further in the subsequent stages of this case study.  

Upon meeting a full condition of release over age 60, Pam’s must decide what she wants to do with her Super. She has the option to roll her funds out to another fund or start a Deferred Income Stage or Full Stage income stream. Once funds are into one of the income stages under IRIS, Pam will no longer be able to make lump sum withdrawals, so it is important to retain an amount in a regular Account Based Pension for purchases like Cars, Holidays or renovations. Determining the appropriate amount requires analysis of future needs and Centrelink Benefits to find an ideal split. 

Deferred Income Stage

During the deferred income stage Pam enjoys several key advantages. This phase allows her to continue contributing to her account, with the added benefit of no taxation on investment earnings, potentially fostering substantial asset growth. Pam also receives annual bonuses from the provider, calculated based on her age and chosen death or exit benefits, acting as a safeguard against premature depletion of her account balance. 

A significant perk of the Deferred Income Stage is the 40% reduction in the assessed account balance for Centrelink asset testing and Income not being assessable. This enhances Pam’s eligibility for social security payments like the Age Pension. Furthermore, she can make withdrawals, up to a maximum determined by her age, providing both income and further reducing the assessed account balance for Centrelink purposes. This can carry on until she has reached the limit of allowable withdrawals, known as the Capital Access Schedule. These features make the deferred income stage strategically interesting, for securing Pam’s financial future and optimising her retirement assets. 

Full Retirement Stage

In the full retirement stage of Pam’s financial plan, she receives an automatically determined maximum income annually, with an option to choose a lesser amount if needed, which may enhance her Centrelink benefits and future withdrawal limits. She also continues to receive annual bonuses as a safeguard against depleting her account balance. 

Centrelink remains a key factor, assessing her account balance at a 40% discount for asset testing, boosting her social security eligibility. This discount rises to 70% after age 84. This stage simplifies her retirement income strategy, emphasising stability and continuity while optimising Centrelink benefits. 

Deferred Income or Full Stage Retirement discount

This example, shows that only 60% of the lower ‘deemed’ value of the pension is assessed for Centrelink’s asset test purposes. Importantly, the 40% discount only applies once it moves to the deferred income or full stage.

Benefits of Our Advice

Our comprehensive analysis has secured Pam’s retirement. By transitioning to the Innovative Retirement Income Streams, her financial assets gain substantial longevity, with $100,904 remaining at age 90. A unique Centrelink assessment assumes earnings at the deeming rate, boosting her eligibility for the Age Pension. The IRIS, with its three-phase structure, creates heightened stability and allows us to help Pam optimise Age Pension benefits. Our advice not only safeguards Pam’s financial future but also maximises her financial well-being in retirement, reflecting our commitment to empowering clients with innovative solutions tailored to their unique circumstances and aspirations. 


Are you over 50 with between $300,000 – $1,200,000 in super either personally or combined? If so, find out more about whether IRIS may be suitable for your retirement – Register for our upcoming IRIS Seminar today!


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Important Note
Any information provided here is general advice only and does not consider your objectives, financial situation or needs. This information should not be taken as comprehensive and does not constitute legal or financial advice. You should seek legal, financial or other professional advice before relying on any content. Yield Financial Planning is not responsible to you or anyone else for any loss suffered in connection with the use of this information. Information is only current at the date initially published.

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Get started with a free strategy consultation and receive a copy of the Good Fortune Guide – written by James McFall, Managing Director Yield FP and 2020 National Finalist Certified Financial Planner of the Year to help educate you on your Financial Plan.