Transition to retirement

A gradual move to retirement

The Australian Government has made it possible for you to keep working while drawing down some of your super benefits. The policy, called transition to retirement, allows you to supplement your salary and maintain a comfortable lifestyle. You can also use the policy to save tax and boost your super before you retire.

Making the transition to retirement

There are two ways to use a 'transition to retirement' (TTR) pension:

  • Keep working full-time and boost super
  • Reduce work hours and soften the drop in income

Once you hit preservation age (between 55 and 60), you can draw down a pension from your super even if you are still working.

See when your preservation age is.

Super and pension age calculator

If you are under age 65 and still working, you can transfer the sum of your super to a super pension and withdraw between 4% and 10% of your pension account balance each financial year. You cannot withdraw money as a lump sum.

Most super funds offer a pension option, however if your fund doesn't, you can open a pension account with a different super fund. Before you do, consider seeking professional financial advice.


Boost your super savings

Your super balance will keep growing as your employer continues to make contributions into your super account. Salary sacrificing some of your pre-tax income into your super will further boost your super savings.

Pay less tax

Employer contributions and salary sacrificed contributions are taxed at a low rate when they go into super. This is likely to be lower than your marginal tax rate.

When you turn 60, you won't pay any tax on your pension income. Even if you are under age 60 you will get a tax rebate on your pension income.

Ease into retirement

If you want to reduce your work hours as a way of easing into retirement, taking a TTR pension from your super fund can supplement your employment income if it's not quite enough to maintain your current lifestyle.

Tax on Transition to Retirement pensions is changing

Investment returns on Transition to Retirement pension accounts will be taxed from 1 July 2017. See the Australian Tax Office (ATO) website for more information on the changes and how they will affect you.

Things to consider

Before you set up a transition to retirement pension, you need to consider if this type of income stream is right for you and how it fits with your work and super plans. Here are some things you'll need to think about:

  • Check your fund type - TTR pensions are only available for members of accumulation super funds. Members of defined benefit funds cannot access a TTR pension.
  • Work out your retirement strategy - Do you want to cut back on work or do you want to boost your super? Your answer will determine the approach you take. Read our case study on transition to retirement boosting super  and case study on transition to retirement part-time work to see how different people use different retirement strategies.
  • Decide on your income needs - Take into account all your income sources to work out how much money you should draw down from your super. Often people find their income needs reduce as they get closer to retirement and they can afford to salary sacrifice into super, or reduce work hours, without having to replace the lost income.
  • Check your social security entitlements - If you or your partner are receiving social security benefits, speak to your financial adviser or a Department of Human Services' Financial Information Service (FIS) officer, as there may be implications for you or your partner's pension and other entitlements.
  • Check the tax implications - This depends on many factors, so find out the tax implications for your situation from your financial adviser.
  • Check on your life insurance - If you have life insurance with your super fund, check with the fund or your financial adviser to make sure your life cover does not reduce or cease.

Transition to retirement is a flexible option that allows you to work longer and retire later and rewards you for staying in the workforce. As it can be complex, we strongly suggest you discuss your options with your super fund and seek financial advice.

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Last updated: 30 Jan 2017