You don’t have to stop working to start accessing your super. A transition to retirement (TTR) strategy lets you draw an income from your super while you’re still working, once you’ve reached your preservation age — which is now 60 for everyone. Used well, it can boost your super or ease you into part-time work. Used carelessly, it can cost you.
How a TTR pension works
You start a TTR income stream from your super and draw between 4% and 10% of the balance each year, while still receiving your salary and super guarantee. You keep working; you just top up (or replace part of) your income from super.
The two classic uses
- Boosting super before retirement. Salary sacrifice more of your pay into super (taxed at 15% going in) and replace that take-home pay with a TTR pension. The mismatch between your marginal tax rate and the 15% contributions rate can grow your super faster — particularly for higher earners.
- Winding down to part-time. Drop to 3 or 4 days a week and use a TTR pension to make up the income gap, so you ease into retirement instead of stopping cold.
The catch most people miss
Since 1 July 2017, earnings inside a TTR pension are taxed at 15% — they are not tax-free like a full retirement-phase account-based pension. That removed a big chunk of the old TTR tax benefit, so a TTR strategy today is mostly about the salary-sacrifice mechanics and flexibility, not tax-free earnings. Whether it stacks up depends heavily on your income, tax rate and balance.
Is a TTR strategy right for you?
It tends to suit people aged 60+ who are still working, have a reasonable balance, and either want to salary sacrifice harder or reduce their hours. The only way to know if the numbers work for you is to model it — which is exactly what a complimentary Donmont review will do before you commit to anything.
Frequently asked questions
What is the preservation age for a TTR pension?
Preservation age is now 60 for everyone (anyone born after 30 June 1964). Once you reach 60 you can start a transition-to-retirement income stream while still working.
Is a TTR pension tax-free?
The income you draw over 60 is generally tax-free, but the investment earnings inside a TTR pension are taxed at 15% - unlike a full retirement-phase account-based pension, where earnings are tax-free.
Is a TTR strategy still worth it?
It can be, mainly as a salary-sacrifice and wind-down tool rather than for tax-free earnings. Whether it benefits you depends on your income, tax rate, balance and cashflow, so it should be modelled before you start.
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