GESB - Transition to Retirement

Transition to Retirement

If you've reached preservation age, Transition to Retirement (also known as TTR) allows you to access your super without having to retire or even reduce the number of hours you work.

How? Through a non-commutable income stream, which is a form of regular income paid from your super, that does not allow lump sum payments.

How does it work?

Transition to Retirement allows you to access your super benefits while you are still working. You can switch to part-time or casual work, change positions to lessen your responsibilities or take some leave to enjoy the benefits of retirement while maintaining your regular income.

What are the benefits of Transition to Retirement?

Transition to Retirement offers significant financial benefits and the flexibility to:

Boost your income - by receiving a retirement income stream from an allocated pension, as well as your normal salary
Boost your super - by continuing to work and sacrifice some of your salary to super
Reduce your hours or change job responsibilities - without reducing your income

You may use a combination of these three options. And, if your situation changes, you can roll funds from your allocated pension back into super.

Find out more by reading our Transition to Retirement fact sheet.

Would Transition to Retirement suit you?

Similar to other elements of retirement planning, Transition to Retirement suits some situations more than others. As a guide, you could ask yourself these questions:

If you start drawing down your super before you retire, will you have enough left to enjoy your retirement?
Will the reduced income that results from working fewer hours entitle you to a super co-contribution payment from the Commonwealth Government?
Would your employer agree to you working fewer hours or decreasing your responsibilities?
Can you live off a lower income as you Transition to Retirement to keep as much super invested as possible?

Whether a TTR strategy will work for you depends on your financial situation and individual needs, so you should always seek financial advice before you decide.

Let's have a look at John's story

John is 60, has a salary of $72,000 and a Gold State Super benefit of $345,600. John decides to transfer 100% of his benefit to GESB's Allocated Pension. Let's take a look at the 3 options that John could consider.
This case study and scenarios are based on certain assumptions, if these assumptions change the results may differ.

Scenario 1: Increasing his income

To increase his income, John decides to continue to work full time and:

Take 100% of his Gold State Super benefit

Receive the maximum amount from his allocated pension (10% of his allocated pension's account balance)

	Full-time - without TTR income	Full-time - with TTR income
Employer salary	$72,000	$72,000
Salary sacrifice	-	-
Assessable Income	$72,000	$72,000
TTR income	-	$29,376
Taxable income	$72,000	$72,000*
Tax (including Medicare levy)^	$16,230	$16,230
Net income	$55,770	$85,146

* As John is aged 60, his income from an allocated pension is tax-free (ie non-assessable, non-exempt income).
^ Using 2011/12 income tax rates. Does not take into account the Temporary Flood and Cyclone Reconstruction Levy known as the 'flood levy'.

In this example, John could increase his salary by nearly $30,000 in the first year.

Scenario 2: Increasing his super

If John doesn't need the additional income he could decide to salary sacrifice his salary into an accumulation scheme such as West State Super, in order to boost his super in preparation for full retirement.

	Full-time - without TTR income	Full-time - with TTR income
Employer salary	$72,000	$72,000
Salary sacrifice	-	$42,000**
Assessable income	$72,000	$30,000
TTR income	-	$29,376
Taxable income	$72,000	$30,000*
Tax (including Medicare levy)^	$16,230	$4,050
Net income	$55,770	$55,326

* As John is aged 60, his income from an allocated pension is tax-free (ie non-assessable, non-exempt income).
** Salary packaged into West State Super.
# Certain assumptions have been used to calculate this figure. If assumptions change, the results may differ.
^ Using 2011/12 income tax rates. Does not take into account flood levy and Low income tax offset.

This option is estimated to provide John with in excess of $116,000^# in additional retirement benefits over a 5 year period.

Scenario 3: Reducing his work hours

John decides to work part-time and:

Take 100% of his Gold State Super benefit
Receive the maximum amount from his allocated pension (10% of his account balance).

	Full-time - without TTR income	Part-time - with TTR income
Employer salary	$72,000	$36,000
Salary sacrifice	-	-
Assessable Income	$72,000	$36,000
TTR income	-	$29,376
Taxable income	$72,000	$36,000*
Tax (including Medicare levy)^	$16,230	$5,040**
Net income	$55,770	$60,336

* As John is aged 60, his income from an allocated pension is tax-free (ie non-assessable, non-exempt income).
** Assumes John is eligible for Senior Australians tax offset.
^ Using 2011/12 income tax rates. Does not take into account flood levy and Low income tax offset.

This option allows John to reduce his hours of work by 50% but increase his take home pay.