What is a Transition to Retirement Pension account?
A Transition to Retirement (TTR) Pension account allows you to access your super periodically if you are still working but have reached your preservation age.
A TTR Pension account can supplement your income leading up to retirement or help you reduce the amount of tax you pay while increasing your retirement savings. You could use a TTR Pension account to:
- Reduce the hours that you work or take a lower paid position and top up your income with pension payments.
- Receive additional income without changing jobs or increasing your work hours.
- Receive regular income from your super and redirect part of your salary to super through salary sacrifice, while still working full time.
You can open a TTR Pension account with a starting balance of at least $20,000 when you reach your preservation age ($50,000 for Retire Easy Pension).
Once you turn 65 your Transition to Retirement Pension account will automatically be converted to a Pension account. This is because there are no limits on how much you can withdraw from your super after this age.
Why invest in a TTR Pension account?
Supplement your income
If you are still in the workforce, a TTR Pension account could help you to cut back your work hours or take a lower paying job. You can receive regular pension payments to supplement the income you have lost by working less, or if you’re looking to increase your income, stay in the same job and top up your regular income.
Reduce your tax, increase your super
If you are aged 60 or over, you can receive tax-free income from a TTR Pension account. At the same time, you can salary sacrifice some of your salary into your Accumulation account (subject to the concessional contributions cap) where it will be taxed at 15% on entry to the fund.
So, you could effectively pay 15% tax on the portion of your salary that you contribute to super, rather than the tax rate you currently pay when you receive this money as salary.
This strategy can also be used if you have reached preservation age but are under age 60, although some tax may still be payable on your pension income. It’s good to talk to a financial adviser about how this works for you.
Taxation of investment earnings for TTR pensions
Investment earnings from your TTR Pension account are taxed at a maximum rate of 15% in the fund (the same rate that applies to accumulation earnings).
Starting your pension
A pension can only be started with one lump-sum amount from your super. So, if you have more than one superannuation account, you could consider combining them into one account before transferring to your pension.
Any contributions we receive from you or your employer after you have opened your TTR Pension account must be added to your Accumulation account (they cannot be added to your TTR Pension account once you commence receiving pension payments).
Working out your minimum and maximum pension amount
To calculate your minimum pension payment amount for a full financial year, simply take the balance of your account and multiply it by the minimum factor of 4% and by the maximum factor of 10%. You can select a pension amount between 4% and 10% of your account balance. This calculation takes place again at 1 July each year.
It's unlikely your pension will start on 1 July, so for the first year your minimum pension income will be a proportion of the full year pension amount. This proportion is based on the number of days from the date of opening the account to 30 June. For example, if you open your account on 1 April, the number of days would be 91 (30 days in April, 31 days in May and 30 days in June). The maximum amount is not proportioned in this way, and is always 10%.
You can choose how often you receive your pension income, from fortnightly, monthly, quarterly, half-yearly or annual payments.
Important information for defined benefit members
If you are a Defined Benefit Fund member and would like to start a pension, you have two options. You can either:
- use the amount in your accumulation balance, provided there are enough funds, or
- close your defined benefit and use some or all of that amount to start a TTR Pension account. Your defined benefit will be transferred to your Accumulation account before the amount you nominate is transferred to start a TTR Pension account.
Defined Benefit accounts (formerly City Super)
Funds from a Defined Benefit account cannot be used directly to open a TTR Pension account, but members may be able to convert their defined benefit to an Accumulation account if their request is approved by their employer. Contact us for more information.
Before closing a defined benefit...
When a defined benefit is closed, future contributions will be added to an Accumulation account and the entire balance will grow with investment returns (positive or negative). You should make sure you fully understand the impact of closing your defined benefit.
You can read more about the TTR Pension account in our Pension account Product Disclosure Statement (PDS).
