Transition to Retirement Pension

Did you know that by using a Transition to Retirement Pension, you could be able to save more for your retirement - without reducing your current income? Why not set up a time to meet with us so we can explore your retirement planning options.

What is Transition to Retirement Pension (TRP)?

A Transition to Retirement Pension (TRP) allows you to withdraw money from your preserved super and supplement your income while you are transitioning to retirement. It can only be commenced when you reach preservation age1.

What are the benefits?

By using this strategy, you could:

  • take advantage of an income stream investment while you are transitioning to retirement, and
  • build a bigger retirement nest egg without reducing your current income and lifestyle.

How does it work?

The Transition to Retirement strategy works as follows:

  • you contribute part of your pre-tax salary directly into your super fund
  • you transfer some of your existing preserved super into a Transition to Retirement Pension (TRP), and
  • you use the regular payments from the TRP to replace the income you’ve contributed into super

By taking these steps, it’s possible to accumulate more money for your retirement, due to a range of potential benefits, including:

  • less tax on contributions, as concessional contributions are generally taxed at up to 15%2, rather than at marginal rates of up to 47%3.
  • tax effective on income, as the taxable income payments from the TRP will attract a 15% pension offset between your preservation age1 and 59. Also, when you reach age 60, the income stream payments you receive are completely tax-free4 and you don’t have to include these amounts in your annual tax return.

While the magnitude of the tax savings will depend on your particular circumstances, combining concessional contributions with a TRP could be a powerful pre-retirement strategy. However care should be taken to ensure you do not breach the superannuation contributions cap as this can result in extra tax.

How can I implement the Transition to Retirement strategy?

A NAB Financial Planner can help you with this strategy and many others, to ensure you maximise your super, while working towards achieving the retirement that you’ve always wanted.

Request a complimentary financial planning consultation

Or call us on 1300 558 863 from Mon-Fri 9am - 6pm (AEST/ADST).

Important information

1 Preservation age is 55 for those born before 1 July 1960 and will gradually increase to 60 depending on your date of birth. To find out your preservation age, go to ato.gov.au

2 Note that, if you are a high income earner with total income of more than $250,000p.a.(including concessional contributions), your concessional contributions will be taxed at an additional 15%.

3 Includes Medicare levy.

4 Assumes the income stream is commenced from a taxed super fund.

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