Upon attaining the preservation age condition of release, you can commence a Transition to Retirement (TTR) pension with your superannuation funds with preserved benefits or a mix of preserved and non-preserved benefits.
If you are over the preservation age but still working, you might not have full access to your superannuation. However, you might be eligible to start an account-based pension under the Transition to Retirement (TTR) rules, sometimes referred to as a Transition to Retirement Income Stream or TRIS..
Once you reach 65, or inform your super fund that you have met a condition of release before turning 65, your TTR pension transitions into a ‘TTR pension in retirement.’ This transition subjects your pension to the same conditions applicable to an account-based pension.
Read our 2024-2025 Superannuation and Pension Guide here.
Transition to Retirement Income Payments
The person can select how much income to receive each financial year. This allows flexibility to meet individual needs.
The governing rules only stipulate that an income payment must be made at least once each financial year. A minimum level of income must be based on a percentage of the account balance at commencement, and each 1 July must be paid. If the income stream kicks off part-way through a financial year, or is commuted before the year’s end, the minimum income payment is pro-rated for that year.
|
Age
|
Income Factor (2023-24)
|
|---|---|
|
Under 65
|
4%
|
For a TTR pension, the maximum income you can opt for is 10% of the account balance, and no lump sum withdrawals are allowed..
The pension will cease when the account balance dwindles to nil, or you request the funds be rolled back to the accumulation phase or another pension account. You can commute the pension anytime, with the funds rolled back to the accumulation phase. Cash withdrawals are only permissible upon meeting a condition of release.
Taxation of Income from a TTR Pension
Any withdrawal you make (be it income, lump sum, or death benefit) from a pension will be split into taxable and tax-free components, maintaining the same ratio as when the pension commenced. The tax on each component is contingent on your age, as outlined below.
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Age
|
Component
|
Taxation Treatment
|
|---|---|---|
|
Any age
|
Tax-free
|
No tax
|
|
60 or older
|
Taxable – taxed element
Taxable – untaxed element |
No tax
Marginal tax rate*, less 10% offset |
|
Under age 60
|
Taxable – taxed element
Taxable – untaxed element |
Marginal tax rate*, less 15% tax offset
Marginal tax rate* |
* Plus, Medicare Levy
Earnings added to your pension account are taxed at the same rate as those that apply to the accumulation phase of superannuation.
Determining the suitability of commencing a transition to retirement pension is part of your retirement plan. At Progressive Financial Solutions, we offer tailored holistic retirement financial planning services to help our clients fund their desired retirement lifestyle. You can read more about our retirement planning services here.