Retirees using account-based pensions, previously known as allocated pensions, could be in for a shock when their new financial year statements arrive in the mail, showing a shrinking balance and smaller annual income.

But there are a few things they can do to soften the blow.

Retirees usually receive pension updates once or twice a year. This means many will be unaware of the substantial decline in value in their account balance that has occurred after their last report at the end of December.

To add to their problems, many retirees are not aware of their fund's underlying investments, how these have been hit by the sharemarket slide or the strategies they can take to better manage their accounts.

Fund titles such as balanced, conservative and growth are common yet there is no legislative requirement that dictates what asset allocation such funds should have.

For example, many retirees have their money invested in the default option - usually a balanced fund that diversifies among the different asset classes. But this can mean different things to different funds.

Colonial First State's balanced fund has a benchmark allocation of 25 per cent to Australian shares, 20 per cent to international shares, 5 per cent to property and 50 per cent to fixed-interest.

AustralianSuper's balanced fund, on the other hand, has a benchmark allocation of 34 per cent to Australian shares, 28 per cent to international shares, 10 per cent to property and 12 per cent to global bonds, with the balance made up of infrastructure, private equity, absolute return funds and cash. The industry fund's higher exposure to shares is likely to generate higher returns over the long term but it also comes at the cost of greater volatility.

And the higher the exposure to the sharemarket, the worse hit you are likely to have been this half of the year - the All Ordinaries Index has declined about 20 per cent over this period.

Investors have done well from the bull run of the past few years but this year's decline highlights why retirees need to monitor their accounts more closely.

For example, take a 65-year-old who put his balanced fund into an account-based pension on July 1 last year. On December 31, it has an account balance of $200,000. For simplicity's sake, let's assume it makes an annual payment of $10,000, based on a minimum 5 per cent drawdown.

However, the fund has suffered a negative return of 8.5 per cent since December (only half the fund is exposed to shares), reducing the account balance to $183,000. Once the income payment comes out of the balance, it reduces further to $173,000.

When the pension is recalculated for the new financial year at the minimum rate of 5 per cent, annual income drops to $8650 - or a loss of income of $1350.

It underlines the importance of making regular payments from appropriate investment options in volatile times.

There are a few strategies - such as using a cash account - to help stem the losses and smooth the volatility.

Here's why: if your regular payment is due the day of a share-market tumble, then to make the payment, the fund manager has to sell more units. If the market jumps the day after, you miss out on that recovery.

That's why advisers recommend making regular payments from a cash option, where the unit price or value never falls.

When the profits re-emerge, advisers suggest transferring some of those profits back into cash to meet future regular payments. That way, you minimise the risk of cashing in funds to make a payment on a bad day.

Finally, retirees who receive a Centrelink part-benefit that's reduced because of the asset test may want to contact Centrelink.

If you forward a current Centrelink or Department of Veterans Affairs schedule from your pension provider, it will show the lower account balance, which could translate to an immediate increase in your Centrelink benefit.

Similarly, those who may have missed out previously under the asset test might now slip under the new upper cut-off thresholds, which were indexed on July 1. You might qualify for at least a part-aged pension from Centrelink.

For single home owners, the upper limit is $540,250 in assets other than the family home; for couples it is $856,500. Non home-owners can have an additional $124,500 in assets. Remember that the pension will be tested against your income - Centrelink will use the test that pays the lower pension.

In many cases, only a fraction of the income from an account-based pension will be counted under the income test and with the new indexed upper limits of $39,507 and $66,001 a year for singles and couples respectively, you may well find you at least qualify for something.

Nick Bruining is a certified financial planner with NC Bruining & Associates.