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How Transition-to-Retirement (TTR) works

Retirement is in your sight, and you would like to either a) wind back your work hours, or b) keep working full-time to contribute more to your superannuation fund. Both these scenarios might be possible with an income stream from a transition-to-retirement (TTR) pension.

What is TTR?

A transition-to-retirement strategy allows individuals who have reached their preservation age (55 if born before 1 July 1960, rising to 60 if born after 1 July 1964) to access their superannuation in the form of a TTR income stream whilst continuing to work beyond their preservation age.

If you’re looking to reduce your work hours, then a portion – between 4% and 10% – of your superannuation can be rolled in to a TTR pension account from which you can draw a regular income to supplement your income from working.

Benefits of TTR

By supplementing your work income because you decide to work less, TTR can make up for reduced income. You won’t have to compromise your lifestyle, providing you with a smoother transition to retirement.

A TTR income stream can help you to increase your superannuation contributions via salary sacrifice (after-tax contributions), creating a larger retirement fund and giving you possible taxation savings. Your contributions will be taxed at the concessional rate of 15% up to an annual cap of $30,000.

TTR and Taxation

From 1 July 2017, superannuation investments underlying a TTR pension are taxed at up to 15% (as in a superannuation accumulation account). However, the earnings on your TTR income stream are tax-free after age 60 if you are a member of a taxed superannuation fund.

Disadvantages of TTR

The more of your superannuation funds that you withdraw into a TTR pension account, the less money you will have available when you retire.

A TTR income stream may affect any Centrelink entitlements you receive.

Voluntary contributions into your superannuation fund may not be worthwhile – providing minimal taxation savings – depending upon your work income level.

Starting and stopping a TTR Income Stream

Transferred funds from your superannuation fund into a TTR pension account are not counted towards your transfer balance cap until you turn age 65 or you fully retire, when the TTR pension will convert to retirement phase.

Whilst you are under age 65, a minimum of 4% of your TTR pension account balance must be withdrawn each year and at least one withdrawal must be made each year.

Once you reach age 65, your TTR pension becomes a retirement phase pension, and you will be entitled to tax-free investment earnings and no upper limit on withdrawals.

You may transfer your TTR pension account balance back into your accumulation account at any time, so long as you have withdrawn at least 50% of that year’s minimum payment.

Approaching retirement? A TTR strategy can be a flexible way to ease into retirement or boost your retirement savings. YML Super Solutions can help you decide whether a TTR strategy aligns with your working life and retirement planning.

How can YML help?

Talk to our YML Super Solutions Team today to see how YML Group can assist you with your TTR strategy. For more information, view our website and contact us on (02) 8383 4444 or by using our Contact Us page on our website.

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