Transition to Retirement

Under Transition to Retirement rules (TTR), if you have reached preservation age, you may be able to use a superannuation income stream to reduce your working hours without reducing your income, or keep working full-time and use the income payments to boost your super. If you decide to reduce your working hours, you can do this by topping up your part-time income with a regular 'income stream' from your super savings. Previously, you could only access your super once you turned age 65 or retired.

Under the TTR rules, you can only access your super benefits as a 'non-commutable' income stream. A non-commutable income stream is one that cannot be converted into a lump sum withdrawal. This generally means you cannot take your benefits as a lump sum cash payment while you are still working. You must take your super benefits as regular payments.

Employers still need to make compulsory super guarantee contributions for all of their eligible employees, including people in transition to retirement.

By starting a transition-to-retirement pension (TTR), you can access any amount from 4% up to 10% of your transferred superannuation assets each year. Then once you turn age 65, or meet some other condition of release, the 10% per annum withdrawal cap is removed.

To establish a TTR strategy, you must first open a pension account. You will be operating two accounts - a superannuation accumulation account plus the pension account.

You must have a minimum of $50,000 to start your TTR account and must leave a minimum of $5,000 in your accumulation account.

It is possible to consolidate any other super funds that you have into your accumulation super account prior to setting up your pension, so that you have more funds available to move into the pension account. This is important, as once your pension is established you cannot add further funds into it without closing it.

Depending on your individual strategy, it is possible to reduce the amount of income tax that a person pays while boosting the super benefit. For example, one of the more popular TTR strategies is to salary sacrifice your wages into your super fund. You must be careful about going over your concessional (before-tax) contributions, and replace that income with tax-free (if over age 60) or concessionally taxed pension payments (if under age 60).

The current (2017/18) contributions cap is $25,000. Please note that concessional contributions also include employer contributions as well as any salary sacrifice contributions you make.

The right combination of salary and super will depend on your salary level, your age, your tax position, the size of your super benefit and your income needs.

A TTR is like any other account-based pension, except for two important requirements:

  1. You can withdraw no more than 10% of your pension account balance each year as pension income.
  2. You cannot withdraw lump sum payments from your TTR pension until you retire, or until you satisfy another condition of release, such as reaching the age of 65.

Non-concessional contributions

Another way of increasing your super balance prior to transferring your super across into a pension account is through making a non-concessional contribution.

Generally speaking, non-concessional contributions are voluntary contributions that you make from after-tax capital. You do not get a tax deduction for making a non-concessional contribution and you do not pay any tax as the contribution is made into super. The non-concessional (after-tax) contributions cap for the current 2017/18 financial year is $100,000 per annum. You can also exercise the bring-forward option, which allows you to make three years of non-concessional contributions in one financial year and forgo the opportunity to make any further non-concessional contributions in the following two financial years.

To set up a Transition to Retirement pension account, please complete the Pension Application Form available in Forms & Publications .

Don't forget to call our Business Relationship Manager, Glen Van Ooran, on 0407 100 203 if you would like any help with this form.