Transition to retirement

Transition to retirement pensions are available to people who have reached their preservation age and wish to access their superannuation as a pension income, but not as a lump sum.

Some people use this strategy to work less but maintain the same lifestyle. Your employment income drops and the difference is made up from the transition to retirement pension. This means that you can benefit from getting a taste of retirement lifestyle before you make the decision to finish work forever. After implementing this strategy, some people have continued to work because they have enjoyed the work-life balance. Seeing your work friends and keeping alert with work challenges can give additional meaning to this lifestyle choice.

Transition to retirement pensions also supports people who undertake salary sacrifice to superannuation and are chasing a lower rate of taxation than their marginal income tax rate. This does not mean that you change your hours at work. The transition to retirement pension compensates for the drop in spending money as a result of a decision to salary sacrifice below your lifestyle budget. The result is that more money is flowing into superannuation than is spent through the pension. The difference is attributed to the tax savings. Why pay tax when you have the option not to?

The value of the pension is a maximum of 10% of the balance of the fund per annum until you retire. When you stop work the transition pension becomes a normal allocated pension and the 10% limit is removed. You can also withdraw lump sums from an allocated pension.

Under age 60 the pension is taxable but brings with it a 15% rebate and in some cases a deduction. For people over age 60 the pension income is tax-free. It follows that as a source of income it is a tax efficient option.

However, there are risks to consider before accessing superannuation through a transition pension. In some cases the reward does not outweigh the risks. Q Invest are considered expert in retirement planning and will assess the effectiveness of all your options to achieve your lifestyle objectives.

The trigger to exploring your options with transition to retirement pensions is reaching your age 55. Take no chances – get advice from Q Invest.