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What is a transition to retirement (TTR) strategy?

When you reach your preservation age , you can access your super as a TTR pension without having to retire. TTR strategies work in one of two ways:

  1. Work full time while your employer continues to make contributions into your super account. You may also salary sacrifice into your super. The amount you sacrifice is then supplemented by a transition to retirement pension drawn from your super. The benefit of this strategy is that your transition to retirement pension payments may be taxed at a lower tax rate than the salary they have replaced (for example, transition to retirement pension payments are tax free for most people once you’ve reached age 60). However, as of 1 July 2017, earnings on investments within a transition to retirement pension are taxed at up to 15 per cent in the same way as superannuation accumulation assets. This removes the tax free concession on transition to retirement pension assets that was previously in place.
  2. Cut down your working hours and draw on your super through a transition to retirement pension to supplement your lost income.

There are rules and limitations in relation to TTR and it may not suit your individual circumstances as the tax rules can be complex. It’s a good idea to speak to a financial adviser to help you decide if it’s the right choice.