Transition to retirement

A transition to retirement (TTR) pension, also called a transition to retirement income stream, enables you to receive regular payments from your super while you’re semi-retired. If you’re approaching retirement and want to reduce the hours you work without stopping completely, this might be an option for you.   Once you’ve turned 60, you can typically start a TTR pension.

You can also set up a TTR pension to access more income while you continue to work full-time. This extra income, up to 10% of your TTR account balance each year, could be used for expenses, to improve your lifestyle, or to top up your super through salary sacrifice.    

You should note that if you’ve retired and reached your preservation age, you can already access your super.  If this is the case, a flexible and tax-effective account-based pension might be a better option for you. 

A TTR income stream is restricted to a yearly maximum payment of 10% of your account balance. So, if you start a TTR pension with a balance of $100,000, the maximum you’ll be able to receive in pension payments during that financial year is $10,000. 

In the first year of starting a TTR pension, the maximum limit is based on the balance you open your account with. The 1 July balance is used for TTR pensions opened in previous financial years.    

You don’t need to work less to start a TTR income stream. You can also continue to work full-time and use it for its tax benefits.    

At age 65 or when you retire, a TTR pension automatically switches to the rules of a full account-based pension, which has fewer restrictions and better tax benefits.

A TTR pension can be an effective way to reduce your work hours as you approach retirement, without reducing your income. But a TTR pension will leave you with less money for retirement, so there are some important things to consider.    

• What is your super balance and how long will your super last you through retirement?

• Does your super fund give you the option to start a TTR pension?   

• How much income do you need for your retirement?   

• Will your government benefits be impacted?    

• Will your life insurance in super be affected?   

• Would you prefer to work full-time and start an account-based pension when you retire?   

Depending on your situation, you might want to let your super grow rather than accessing it through your TTR pension.   

Don't forget that if you’ve retired and reached your preservation age, you can already access your super.  By comparison, an account-based pension is more flexible and offers greater tax benefits.      

 At age 65 or when you retire, a TTR pension will automatically switch to the rules of an account-based pension.  This means you can access more of your balance, and the earnings within the account won’t be taxed.   

•  Less money for retirement:  Your super savings will typically be reduced with TTR pension payments. Our retirement calculator can help you work out how much money you need for retirement. 
• May affect government benefits: As it’s additional income, a TTR income stream could impact you or your partner’s eligibility for government support like the Age Pension, or a Carer payment. Depending on your overall financial situation, you might not be eligible for these anyway.    
• Can affect life insurance: Does your cover reduce or stop when you start a TTR pension? Make sure you check with your provider.   

If you’re aged 60 or over, all pension payments received from your TTR income stream are tax-free. If you’re under 60 when you open your TTR pension account, your payments will be taxed at your personal marginal tax rate, with a 15% tax offset.

However, investment earnings on the money in your TTR pension are still taxed at a maximum rate of 15% - the regular rate of your super investment earnings – until you fully retire or turn 65. After this time, your TTR pension will convert to the rules of account-based pension and investment earnings are tax-free. 

You can learn more about how to manage your tax during retirement here.