As you approach retirement, your income needs and how you access super often change. Converting a Transition to Retirement (TTR) pension into a retirement phase pension can be is a key step for many people once eligibility conditions are met.
What is a TTR Pension?
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, and can be used as part of a broader transition to retirement strategy.
Features of a TTR Account
Pension payments you receive are subject to both an annual minimum and maximum withdrawal limit, meaning there is a cap on how much can be drawn each year. Investment earnings within a TTR account are generally taxed at a concessional rate rather than being tax-free.
Ways to use a TTR account
After conversion, the annual maximum withdrawal limit of 10% that applies to TTR pension accounts no longer applies. However, minimum annual pension payment requirements continue to apply to retirement phase pensions.
Also, once converted to a TTR, investment earnings on assets supporting your retirement phase pension are generally tax-free. Pension payments may also be tax-free, depending on your age and fund structure.
When can you convert to a retirement phase pension?
Conversion is only available once specific conditions are met, which determine when your super can move into the retirement phase.
Eligibility criteria
A TTR will generally convert to a retirement income stream once you meet a full condition of release. This occurs automatically when you turn 65, or if you notify your super fund that you have permanently retired or changed jobs between the ages of 60-65.
Transfer balance cap
A transfer balance cap limits how much super can be moved into the tax-free retirement phase. The cap is managed by the ATO and applies across all super accounts. There are tax consequences if the cap is exceeded.
Planning your next steps
Converting a TTR to retirement phase pension is an important milestone. Reviewing timing, income needs and access rules as part of planning for retirement can help ensure your super continues to support your goals.
What happens to my TTR when I retire?
Your TTR account can be converted to a retirement phase pension if you meet a condition of release before you turn 65. It will generally happen automatically when you turn 65.
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.