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- 58 years old
- Earns $77,000 p.a.
- Defined Benefit Division member
- Been offered a redundancy of approximately $140,000
- Looking to only work casual or part time
This case study focuses solely on a Transition to Retirement (TTR) strategy; the overall advice includes a number of other strategies which complement the TTR advice. To ensure you maximise your financial benefits, please speak to a UniSuper Private Client Adviser.
Barry is a 58-year-old UniSuper Defined Benefit member who earns $77,000 p.a. He has been offered a redundancy payment of about $140,000.
His short-term concerns are his redundancy and immediate cash flow needs, particularly if he chooses to now find part-time or casual work before he retires at 67, the age he is eligible for the Age Pension.
Barry has the following superannuation accounts:
- A UniSuper Defined Benefit account with a balance of $125,000.
- A UniSuper Accumulation account with a balance of $10,000.
- An external retail superannuation account with a balance of $320,000, which includes an Unrestricted Non-preserved (fully accessible) amount of $70,000.
If Barry works part-time or casual hours, he will earn $15,000 to $20,000 a year to supplement his UniSuper pension. These earnings will help Barry to repay his $225,000 mortgage and meet his cost of living requirements of about $35,000 a year.2,3
For a $3,000 (inc. GST) fee, Barry's Private Client Adviser explored whether a Transition to Retirement strategy could be useful, in conjunction with debt repayment, an appropriate investment mix, and retirement projections, which include any potential future Centrelink entitlements.
Barry decides to think about the advice offer and in the meantime compares his super funds using the Chant West tool on our website. Barry notices he can save on fees by combining his entire super into UniSuper and does this before proceeding with the UniSuper advice.
How will the Transition to Retirement strategy work?
- Barry transfers most of his Accumulation super (approximately $250,000) to an account-based pension (UniSuper Flexi Pension).
- Barry withdraws up to 10% (maximum allowed under current legislation) of his pension balance each year, which supplements his casual employment to meet his income requirements.
There are a number of other benefits associated with the TTR strategy recommended by his Adviser.
- Along with his casual work earnings, Barry's income from his UniSuper Flexi Pension will be enough to meet his cost of living now and in retirement, when he receives the Age Pension.
- When Barry turns 65 he can rollover his current TTR UniSuper pension to a Flexi Pension, which is tax-free.
Along with his casual work earnings, Barry's income from his UniSuper Flexi Pension will be enough to meet his cost of living now and in retirement, when he receives the Age Pension. When Barry turns 65 he can rollover his current TTR UniSuper pension to a Flexi Pension, which is tax-free.
How we calculated Barry's figures
- Barry leaves a small amount in his UniSuper Accumulation account to keep it open for salary sacrifice and employer contributions, plus insurance premiums.
- As Barry will only be working casual or part-time we have not included any compulsory employer contributions in the calculations. Investment returns based on super fund earnings of 5.75%. This represents 1.5% capital gain and 4.25% income.
- Barry's investment earnings in his accumulation account are taxed at a maximum of 15% but may be lower if tax offsets such as dividend franking credits apply.
- The amount of TTR pension that can be withdrawn each year by Barry must be between the minimum 4% and maximum 10% of the account balance until age 65. After age 65, there are no restrictions on the maximum withdrawal amount.
1. Barry is a hypothetical member, but the relevant facts are based on a real member. 2. All figures and benefits provided are based on the specific factual circumstances detailed in this scenario. The amounts are not guaranteed and will vary depending on your specific circumstances. Figures may be rounded. 3. These calculations are based on legislation applicable in the 2018-19 tax year.
The information contained in this case study is not legal, taxation or accounting advice. It is intended to provide general information only. It has been prepared without taking into account your objectives, financial situation or personal needs. Prior to making any investment decisions, you should speak with a financial adviser to consider whether this information is appropriate for your needs, objectives and circumstances. You should also obtain a copy of the relevant product disclosure statement (PDS) prior to making a decision regarding any investment in any financial product. Whilst care has been taken in the preparation of this information, the accuracy or completeness of the information is not guaranteed. This case study was prepared and issued by UniSuper Management Pty Ltd ABN 91 006 961 799, AFSL No: 235907, which is also the administrator of, and wholly owned by, the UniSuper Superannuation fund (ABN 91 385 943 850). UniSuper Limited (ABN 54 006 027 121) is the trustee of the fund. UniSuper Advice is operated by UniSuper Management Pty Ltd, which is licensed to provide financial product advice to members.