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How a transition to retirement strategy works

A transition to retirement strategy can be a tax-effective way to access income from your super before retiring.
Published 17 May 2023   |   3 min read

If you’re approaching retirement, you may be considering ways to reduce your working hours without taking a pay cut. A transition to retirement (TTR) pension may help to fill the gap.

A TTR strategy is a way to access an income stream from your super if you continue to work after reaching your preservation age. The idea is to restructure your income, so your pay remains the same while boosting your super at the same time.

Reduce your working hours without reducing your income

A TTR enables you to top up your part-time income with a regular retirement income stream from your super, while continuing to grow your super balance with employer contributions.

Your employer will continue to add to your super for as long as you work. You can also make additional voluntary contributions to your super such as salary sacrificing into your super account.

Tax savings

Your employer contributions, as well as salary-sacrificed contributions, are taxed at a low rate of 15%. If this is lower than the marginal tax rate applied to your salary, you may be able to reduce your income tax with salary sacrifice contributions whilst boosting your superannuation savings.

If you’re 60 or older, your pension payments will be tax-free. If you’re 55-59, the taxable portion of your TTR pension payments will be taxed at your marginal rate, but you will receive a 15% tax offset on the taxable portion of your pension payments.

How to set up a TTR

If you’ve reached your preservation age and you’re still working, you can transfer some of your super savings to a TTR pension account to set up a path to retirement.

You’ll need to keep some funds in your super account to keep it open, as you’ll continue to receive compulsory contributions from your employer, as well as any voluntary contributions you make.

What are the rules?
  • You can only access your super as a pension income stream, not a lump sum.

  • There are limits to what you can contribute to your superannuation, known as contribution caps.

  • There are minimum and maximum amounts that you can withdraw from your super as an income per year.

Things to consider
  • Check if starting a TTR will impact your or your partner’s entitlement to any government benefits

  • If you have life insurance within super, check if your cover will be impacted by commencing a TTR.

  • If you start drawing down your super too early, you may not have enough income payments to sustain your lifestyle throughout your retirement.

Ready now? Start a TTR pension application. 

We recommend you seek financial advice when considering whether a TTR is right for you. This is general information only and does not take account of your individual investment objectives, financial situation or needs. Before acting on it, consider its appropriateness to your circumstances and read the Financial Services Guide and Product Disclosure Statement.


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