SCC Chartered Accountants

   

Transition to Retirement with your Superannuation savings

If you are 55 and over, you now have the option of using your superannuation to ease into retirement.

Until not so long ago, it could be that a person could only get hold of their superannuation money if they retired after age 55 or upon reaching age 65 (younger if female).

Now the rules allow those nearing retirement access to their superannuation while still working.

What is a TTR income stream?

Transition To Retirement (TTR) pensions have been available since July 2005 and allow a person to access their superannuation as a income stream, or pension, after reaching the allowable age (“preservation age”), but while you are still working. TTR superannuation pensions do not only allow for lump sums like other superannuation income streams, lump are only allowed in specific circumstances.

The aim of these income streams is to provide people with some flexibility in the lead up to retirement.  For example, a person may choose to reduce their working hours and at the same time access their superannuation as a Transition To Retirement pension as a supplement to meeting their income needs.

These pensions are essentially like any other retirement income stream, apart from two important differences.

Firstly, they are non-commutable, which means they cannot be converted into a lump sum – until a person satisfies the ‘retirement' condition of release, or reach age 65.

Secondly, a person can only withdraw up to 10% of the account balance (at the start of each year) as a pension payment.  This is in addition to the normal minimum requirements that must be taken.

Preservation Age

A persons preservation age is generally the date from which you can access your superannuation benefits and depends upon the date of birth of the superannuation account holder.

Anyone born before 1 July 1960 has a preservation age of 55. Anyone born after 30 June 1964 has a preservation age of 60. See table for preservation age of anyone born within the two dates above.

Date of Birth	Preservation Age
Before 1 July 1960	55
1 July 1960 – 30 June 1961	56
1 July 1961 – 30 June 1962	57
1 July 1962 – 30 June 1963	58
1 July 1963 – 30 June 1964	59
After 30 June 1964	60

Superannuation contributions

As long as a person is eligible, they may contribute to superannuation, their employer may also make contributions to superannuation.  In any case, the employer's usual superannuation guarantee obligations would still apply.

Is a transition to retirement pension right for you?

Transition to retirement pensions can provide people with flexibility in the years approaching retirement as well as the opportunity to boost your eventual retirement assets in some circumstances.

People who might find transition to retirement pensions attractive can include those:

• who have reduced from full time to part time working hours, eg from full time to 3 days per week.  The reduction in salary from employment/work can be supplemented with income from the transition to retirement pension
• who are able to salary sacrifice to superannuation at the same time as receiving concessionally taxed (or tax-free) transition to retirement pension income – the outcome of such a strategy can be a greater build-up of superannuation assets by the time you reach actual retirement from the workforce

Note that the transition to retirement rules and associated strategies can be very complicated.

It is recommended that you seek expert advice from your financial adviser before deciding if this type of income stream and strategy is right for you.