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.
What is a transition to retirement (TTR) strategy?
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 age 60. The idea is to restructure your income so your pay remains the same while boosting your super at the same time[AT1] .
Who is a TTR strategy suitable for?
A transition to retirement strategy is generally suitable for people who have reached age 60 yrs, but are not ready to fully retire. It may appeal to those wanting to reduce working hours gradually1, supplement their income or improve tax efficiency while still employed.
A TTR strategy can also suit individuals focused on long-term super growth who want to continue receiving employer contributions while accessing part of their super as an income stream.
How a transition to retirement strategy works
A transition to retirement strategy can provide more flexibility as you move from full-time work into retirement. It is designed to help you manage income, contributions and long-term planning during this in-between stage while staying within superannuation rules.
Reduce your working hours without reducing your income
A TTR strategy 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%2. 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.
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 and commence a transition to retirement account, ensure the account balance remains sufficient to continue funding insurance premiums.
• 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.
Retirement planning with values in mind
Australian Ethical is an award-winning super3 fund for people who want their retirement savings to support both their future and positive change.
Ethical investing through every life stage
Our Ethical Criteria guide every portfolio we manage, including super and pension options.
Retirement income options when you’re ready
When the time comes, you can transition your super into an ethical pension to help support regular income in retirement.
A long-term approach you can feel confident in
We invest in companies contributing to solutions for people and planet, while restricting4 those that cause harm.
Explore your transition to retirement options
A TTR strategy can offer flexibility as you approach retirement, but eligibility rules, tax treatment and long-term impacts are important to understand. Australian Ethical provides ethical pension options and resources to help you consider what may suit your circumstances.
Yes. A transition to retirement arrangement can be started even if you continue working full-time, as long as you have reached age 60. Some people use a TTR strategy to support salary sacrifice contributions or to restructure their income, rather than immediately cutting back work hours. Eligibility and payment limits still apply.
It may. Once you reach Age Pension age, your super balance and any income streams from a TTR may be assessed under Centrelink’s income and assets tests.
In many cases, yes. You may be able to stop payments, roll the balance back into accumulation, or convert the income stream into a different retirement product, depending on your fund’s rules and whether you have met a full condition of release.
A transition to retirement income stream lets you access a limited portion of your super once you reach age 60 while still working. Withdrawals are capped each year, and your super usually stays in the accumulation phase, so investment earnings may still be taxed.
A retirement pension generally starts after you fully retire, has no maximum annual withdrawal limit (only a minimum), and earnings on the pension balance are typically tax-free up to the relevant cap.
We recommend you seek financial advice to consider your insurance needs before making any changes to your insurance cover. This information is general in nature and does not take into account your individual objectives, financial situation or needs. Before making a decision, consider whether it is appropriate for your circumstances and read the Financial Services Guide and relevant Product Disclosure Statement.
1 Australian Taxation Office (ATO) – Transition to retirement
2 Australian Taxation Office (ATO) – Salary sacrificing super
3 Please refer to our website for the specific awards we have won, including the specific categories.
4 + Our investment restrictions include some thresholds. Thresholds may be in the form of an amount of revenue that a business derives from a particular activity, but there are other tolerance thresholds we can use depending on the nature of the investment. We apply a range of qualitative and quantitative analysis to the way we apply thresholds. For example, we may make an investment where we assess that the positive aspects of the investment outweigh its negative aspects. For information on how we make these assessments for a range of investment sectors and issues such as fossil fuels, nuclear power, gambling, tobacco, human rights, and many others, please read our Ethical Guide.