They allow you to withdraw up to 10% of your superannuation savings in the form of a pension without needing to stop work.
Even if you’re nearing retirement age you mightn’t be looking to leave the workforce just yet. Maybe you want to save more money, or perhaps you enjoy the mental stimulation and interaction.
Whatever the reason, having access to a transition to retirement (TTR) income stream could provide greater financial flexibility, as you can periodically withdraw money from your super while continuing to work full-time, part-time or casually.
It’s a type of pension that enables you to access some of your super via periodic payments, even if you’re still working and receiving an income from your employer or business.
To access your super this way, you must have reached your preservation age, which will be between 55 and 60, depending on when you were born.
See the table below to work out what your preservation age is.
Date of birth
|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|
|1 July 1964 and onwards||60|
You can only withdraw between 4% and 10% of your super savings each financial year. And, you aren't able to make lump sum withdrawals unless you meet certain conditions of release, such as retirement.
It’s also worth noting the income you receive is based on the amount you have in your super, so you won’t be guaranteed an income for life.
If you’d like an idea of how much you’ll have in retirement and how long your retirement savings might last, our online retirement simulator tool can help you crunch the numbers.
Up to age 60, the taxable amount of your income from a transition to retirement (TTR) pension is taxed at your personal income tax rate, less a 15% tax offset. Then, once you turn 60, the income you receive from your TTR pension is completely tax-free.
While the tax treatment of income you receive from a TTR pension has not changed, the tax treatment of investment earnings on super fund assets that support TTR pensions changed on 1 July 2017.
Investment earnings on super fund assets that supported a TTR income stream were previously tax free.
Earnings on fund assets supporting a TTR income stream are now subject to the same maximum 15% tax rate that applies to super accumulation funds.
The ability to commence a TTR income stream may present you with some useful opportunities.
For example, you could either work less, or work the same hours while sacrificing some of your salary into super. In both cases, you can use your TTR income stream to supplement any reduction in your take-home pay.
There are however numerous things to consider, particularly when it comes to weighing up your circumstances and properly assessing any potential tax implications. These include:
If, after you reach your preservation age, you decide you’d rather retire from the workforce, you will have other options when it comes to your super.
For further assistance around whether a transition to retirement (TTR) income stream may be right for you, speak to Russel Molin, Financial Planner at Wealth Financial Strategies.
T 08 6363 0611 M 0434 497 223
F 08 6363 0601 E firstname.lastname@example.org
A Po Box 115 Northlands WA 6905 Unit 14/386 Wanneroo Road Westminster WA 6061