Are you thinking about retiring, but not ready to give up working completely? Setting up a transition to retirement (TTR) pension allows you to receive payments from your super savings while you work less and wind down towards retirement. With a TTR income stream, you can enjoy working at a pace that suits your life stage and personal goals, while keeping your income steady.   

What is 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.    


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 enable you 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, and you want to set up a super income stream, a flexible and tax-effective account-based pension might be a better option for you.  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. 

How does a transition to retirement pension work?  

A transition to retirement income stream works by enabling you to access part of your super before you’ve completely retired.  


Once you’ve reached your preservation age, but have not yet retired, you can typically start a TTR pension. However, this will depend on whether your super provider allows you to start one.    


Your preservation age is based on the year you were born. See the chart below.   

Your birthday
Preservation age
Your birthday
Before 1/7/1960
Preservation age
Before 1/7/1960


Your birthday
1/7/1960 to 30/6/1961
Preservation age
1/7/1960 to 30/6/1961


Your birthday
1/7/1961 to 30/6/1962
Preservation age
1/7/1961 to 30/6/1962


Your birthday
1/7/1962 to 30/6/1963
Preservation age
1/7/1962 to 30/6/1963


Your birthday
1/7/1963 to 30/6/1964
Preservation age
1/7/1963 to 30/6/1964


Your birthday
After 30/6/1964
Preservation age
After 30/6/1964


A TTR income stream is restricted to a yearly maximum pension payment of 10% of your TTR 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. 


This means you can’t make lump sum withdrawals from your TTR pension while you're still working.


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.   


A TTR pension enables you to create a plan around how many hours you still want to work, and how much you’d still like to earn.     


Regular payments through a TTR pension allow you to work reduced hours without necessarily reducing your income. Your TTR pension can supplement the foregone income with periodic pension payments.     


But 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.    

Can I start a transition to retirement pension from my self-managed super fund (SMSF)? 


It’s not compulsory for your SMSF to offer a transition to retirement pension, but if it does, you can.    


Since members of an SMSF are often the trustees and run it for their own benefit, this decision is in their hands.   

Things to ask yourself before you set up a transition to retirement pension   


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 super savings for your retirement, so there are some important things to consider.    


  • What is your super balance and how long will it last you through retirement? Learn more here.   

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

  • How much income do you need today, and how much 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.  This means a TTR pension may not be the best option for you.  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 that your pension payments will no longer be limited to 10% of the account balance, and the earnings within the account won’t be taxed.   

Benefits of a transition to retirement pension  

  • Income replacement: If you’re working less, you can boost your employment income with pension payments.   
  • Continue to work full-time and boost your super: You can also continue to work full-time, so that you’re building your super as you withdraw from it. The TTR income stream payments can provide you with more cashflow to make additional contributions to super like salary sacrifice or personal contributions. This can boost your super if the contributions are higher than what you’re drawing from the pension.  
  • Tax benefits: If you’re over 60, your pension payments are tax free. Your super investment earnings will still be taxed though (see tax section below).    
  •    Lifestyle: Work less, receive the same amount of money, and enjoy more free time as you wind down towards retirement.    

What are the disadvantages of a transition to retirement pension?  


 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.   

Will I pay tax on a transition to retirement income stream?  


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 (which reduces the amount of tax you pay).  


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 – up until you tell your super provider you have fully retired or turn 65. After this time, your TTR pension will convert to the rules of account-based pension and investment earnings are tax-free.   


There's a lifetime limit on how much super you can transfer into a tax-free retirement account. This is called the transfer balance cap. As of 1 July 2023, the general transfer balance cap is $1.9 million. This amount is reviewed each financial year. Note that TTR only counts against the cap when the investment earnings are tax-free. 


There are rules and limitations for TTR pensions that you should be aware of.  

A summary of transition to retirement income   


  • Anyone who has reached their preservation age, is still working, and has super savings could apply to set up a TTR pension.  
  • There are restrictions and trade-offs that come with setting up a TTR pension.   
  • It may not suit your individual circumstances as the rules can be complex.  
  • If you have questions about our TTR pension, you can call us on 13 13 36.    


It is recommended that you speak with your financial adviser or connect with a financial adviser if you don’t already have one. You can use our find an adviser service to locate one near you. They’ll review your personal situation and help you find a solution which best suits your life-stage, financial goals, and risk tolerance. 

What’s next?


Retirement Planning

Create a strategy for your wealth that helps you retire with financial freedom, security, and purpose. 


Retirement Calculator

Quickly and easily estimate how much super you may have in retirement and how much you may need.


Account-based pensions

Learn how they work, how you can start one, and the benefits of setting one up.

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Avanteos Investments Limited ABN 20 096 259 979, AFSL 245531 (AIL) is the trustee of the Colonial First State FirstChoice Superannuation Trust ABN 26 458 298 557 and issuer of FirstChoice range of super and pension products. Colonial First State Investments Limited ABN 98 002 348 352, AFSL 232468 (CFSIL) is the responsible entity and issuer of products made available under FirstChoice Investments and FirstChoice Wholesale Investments.


Information on this webpage is provided by AIL and CFSIL. It may include general advice but does not consider your individual objectives, financial situation, needs or tax circumstances. You can find the target market determinations (TMD) for our financial products at which include a description of who a financial product might suit. You should read the relevant Product Disclosure Statement (PDS) and Financial Services Guide (FSG) carefully, assess whether the information is appropriate for you, and consider talking to a financial adviser before making an investment decision. You can get the PDS and FSG at or by calling us on 13 13 36.