What are the main features of a transition to retirement pension?
A Transition to Retirement Pension (TRP) allows you access to your super money without retiring. This means you can:
- remain in the workforce and reduce your hours of work as you approach retirement, or
- boost your retirement savings by putting more of your pre-tax salary into super and replacing the foregone salary with pension payments. This is generally referred to as ‘salary sacrificing’ and is often more tax effective than simply taking the full amount as salary.
A TRP has the same rules as an account-based pension but with two added requirements:
- you cannot take more than 10% of your account balance out as a pension payment in any given financial year. The same 10% limit applies regardless of when you start your TRP, even if you started it in mid-June, you’d still be allowed to take up to 10% of the full balance before the end of the financial year.
- you can only take lump sums if some of the money in your TRP is not classified as preserved. This might happen if you retired at some point in the past, then went back to work, added to your super and then started a pension. Your pension would be a TRP because it includes some preserved super (any increase after you went back to work). You could only take lump sums from the part that is not preserved. For most people with a TRP, the entire amount is preserved and therefore no lump sums are possible.
As soon as you meet a condition of release that gives you full access to your super, such as retirement, these limitations will stop applying to your TRP and it will become just like a normal account-based pension.