Transition to Retirement
A type of account available to members who are aged 56 - 65 & want to access their super while working. You can receive regular payments from your super, while keeping the balance of your funds invested.
Transition to Retirement strategies
Transition to Retirement (TTR) strategies can enable you to keep earning while making the most of your super.
When you reach your preservation age, you can access your super as a Transition to Retirement (TTR) pension without having to retire. This means you can keep earning a wage, while starting to draw down on your super. This strategy can also have some tax benefits.
A TTR account is a second kind of account (an account-based pension) which you can have within super. Your regular super account which your employer contributes into is called an accumulation account, this accumulates in value through your working life.
A TTR account isn’t designed to accrue value over time. You start your TTR with a lump sum from your accumulation account. You can then draw down regular pension payments from your TTR as a second source of income. So, you could be receiving regular monthly payments in to your bank account, from your TTR. You can’t add any more money to it – and neither can your employer – so while you’re working, your employer will keep making regular SG payments into your normal accumulation account.
When you open a TTR account, your money is still invested, and it’s still considered superannuation, however (with limitations) you can start to draw down in to your bank account. A TTR pension can be rolled back into your super accumulation account at any time, you’re not locked in for a particular term.
Using a TTR to reduce work hours
As you approach retirement you might like to reduce your work hours without reducing your income. A TTR pension can be used to supplement your income if you decide to reduce your work hours.
This could mean less money in retirement. If you start drawing down your super early it may impact the lifestyle you can achieve through retirement.
Using a TTR strategy to reduce tax
The tax treatment of super & TTR accounts means that there can be potential for tax concessions. There are a few steps in the process – essentially you put more of your wage in to your regular super account through salary sacrifice, which means you have less in your pocket. You replace that money with payments from your TTR account. You can end up with the same amount of money, while paying less tax.
Case study: Being 60–something has its (tax) benefits.
|Income||$85,000 p.a. (+ 9.5% super)|
Claudia will commence a TTR strategy using part of her accumulated superannuation balance of $175,000.
To grow her super savings, Claudia has decided to salary sacrifice before-tax income into superannuation.
Claudia does not have to pay her whole income tax on the money which she salary sacrifices, instead, she pays a smaller, concessional tax rate of 15%.
Claudia withdraws money from her TTR account to replace the income she has lost through salary sacrifice. Because she is over 60, she doesn’t have to pay tax on her TTR payments. So her take-home pay will remain the same, while she is paying less tax.
As circumstances change, Claudia reviews her TTR strategy annually to make sure it’s still right for her.
|Without TTR strategy||With TTR strategy|
|Income tax paid||$20,342||$11,528|
|Super contributions tax||$1,211||$5,143|
|Take home pay||$64,658||$64,658|
|Super balance at age 61||$185,527||$190,274|
|Super balance at age 62||$196,311||$205,463|
|Super balance at age 63||$207,719||$220,979|
|Super balance at age 64||$219,768||$236,705|
|Super balance at age 65||$232,477||$252,487|
With a Transition to Retirement account, Claudia has $20,010 more in super.
That's 20% more, over a 5 year period!
This example is provided for illustration purposes only and is not a representation of the benefits that may be received or the fees and costs that may be incurred. The information should not be taken as financial advice.
Because Claudia is 60, she can contribute up to $25,000 to her super before tax, each year, via salary sacrifice. These contributions are taxed at a flat rate of 15%, instead of her usual income and Medicare tax rate of 34.5%.
Super Guarantee contributions are an additional 9.5% of her salary. Her employer is already paying $8,075, so she can contribute an extra $16,925 before reaching the limit.
Because she has turned 60, she is eligible to withdraw from her superannuation account, and these withdrawals are tax free.
By salary sacrificing $16,924 and withdrawing only $11,085 each year, over five years, her take home pay doesn't change, and she will have $16,337 extra in super at retirement.
As your situation changes each year, you need to revisit your TTR settings regularly, and you'll need a financial planner to help you set this up. Speak to legalsuper about getting financial advice to get you started with TTR.
- Strategy start date: 1 July 2019
- Relationship status: single
- Tax-free component: $0
- Income indexation: 3%
- Inflation rate: 2.5%
- TTR starting balance $174,000
- Growth rate: 5.5%
- Other income: none
About the legalsuper Transition to Retirement Pension account
|Transition to Retirement Pension Features|
|Suitable for people who are still working and have reached their preservation age and want to save tax while growing their super, or supplement their income by accessing their super savings (up to 10% of your TTR account balance per financial year)|
|Minimum investment amount|
Twice monthly, monthly, quarterly, half-yearly or yearly.
You can choose an income between your minimum and maximum limits.
There are 12 investment options available, including a self-managed option, the Direct Investment option.
|Lump sum withdrawals|
You cannot have partial or full lump sum withdrawals from a TTR account. You can only receive pension payments up to your maximum limit.
You can roll back your TTR account in to your regular super account at any time. You care not locked in to a TTR account for any defined term.
For more information and full terms and conditions, refer the Pension product disclosure statementJoin: Pension membership (1.02 MB)
Fees & costs of a TTR account
legalsuper works hard to keep fees and costs low. Our sole purpose is to maximise the retirement savings of our members. We do not pay commission to agents and are an ‘all profits for members’ fund. To find out more about legalsuper's Transition to Retirement Pension Fees and charges go to Retirement and TTR Pensions - Fees and charges.
Steps for setting up a TTR account
We recommend obtaining advice when establishing your TTR account & strategy. Face to face, online or over the phone, our professional Client Service Managers can give you the perfect game plan for your super.
- Get your game plan. Speak to your adviser, or with one of our Client Service Managers to establish a plan.
- Download and read the legalsuper Pension Product Disclosure Statement
- Complete the Pension membership application form at the back of the Pension PDS. If you are under age 60, you must also complete and attach to the application form a TFN Declaration form from the Australian Taxation Office (ATO).
- If you are transferring monies from another fund, you may also need to complete a legalsuper Request to transfer form, to consolidate your superannuation into your legalsuper superannuation account. Your legalsuper superannuation account will be converted to your legalsuper pension account once all transfers are received
- Submit your paperwork with certified ID as detailed on the application form.
- Once your application is accepted by legalsuper, and your account is established, you will receive a summary that shows the details of your pension.
- You will receive your income payments by Electronic Funds Transfer (EFT) to your bank, building society or credit union account, to your nominated schedule.
- Review your strategy annually.