Do you want to ease into retirement by reducing your work hours? Or, give your super a boost before you leave the workforce? You may be able to through a transition-to-retirement (TTR) strategy.
How TTR works
Transition to retirement is a government initiative that lets you access your super while you’re working as long as you’ve reached your preservation age and are under 65. It could help you:
- Reduce your work hours and supplement your income from your super through a regular income stream from a pension account, or
- Maintain your work hours, access a pension income and salary sacrifice more into your super. (You may even be able to structure the strategy so you don’t affect your net income).
TTR for DBD members
If you’re a DBD member and you use any part of your defined benefit component to purchase a Flexi Pension under the transition to retirement rules, you’ll stop being a DBD member and become an accumulation member.
For more information about the impacts of starting a Flexi Pension with your defined benefit component, refer to the ‘Are you a Defined Benefit Division (DBD) member?’ in the Flexi Pension PDS.
The rules around TTR for DBD members are complex. Make sure you read our fact sheet and think about getting advice from a qualified financial adviser.
Tax and TTR
- Unlike regular pensions, investment earnings on your TTR pension are subject to the same 15% tax that applies to super accounts.
- If you're aged 60 or over, your pension income is tax free.
- If you’re between 55 and 60, the taxable component of your pension will be included in your assessable income and taxed at your marginal tax rate. A 15% tax offset is available to reduce the amount of tax you pay on the taxable component of your pension.
For more information, refer to the 'How pensions are taxed' section in the Flexi Pension PDS.
Remember the general transfer balance cap
If you turn 65 or meet a condition of release, a transfer balance cap (currently $1.6 million for the 2017-18 financial year) will apply to the total amount of super that an individual can hold in the retirement phase tax-free.
Before deciding whether a TTR strategy is right for you, read Your guide to pensions and think about getting financial advice from a qualified financial adviser. Talk to UniSuper Advice on 1800 UADVICE (1800 823 842) to find out how they can help you.