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Accessing Super whilst still working

What is transition to retirement?

Transition to retirement is a strategy that can help you to boost your superannuation savings, reduce your tax and is also an effective strategy if you want to reduce your working hours while maintaining the same level of income. This is achieved by drawing a pension from superannuation using the ‘transition to retirement’ condition of release.

Everyone who is preservation age (currently 55) but less than 65 years of age is eligible to commence a non-commutable allocated pension.

FlowChart YourSalary 


Introducing NCAPs

Non-commutable allocated pensions (NCAPs) have been popular since the federal government’s transition to retirement rules were introduced in 2005. This is because NCAPs allow older Australians access to their preserved
super benefits without having to retire.

What are the benefits of this strategy?

Key benefits of an NCAP strategy may include:

the opportunity to maintain your current income and boost your retirement savings through salary sacrifice (income swap strategy), or
supplementing your income while reducing your work hours and gradually transitioning into retirement.

Can this strategy save you tax?

The benefit of an NCAP strategy comes from the differing tax rates that apply to regular income, superannuation and pensions. A lower rate of tax generally applies to pension payments received from your super, compared with the marginal tax rates on employment income. This advantage is further increased because any investment earnings in an NCAP will be tax free.

How transition to retirement income swap works

Your superannuation pension is taxed at more favourable rates than your salary. So, by replacing some of your salary with a pension, you can receive the same amount in your pocket while your superannuation savings grow each year.

Putting it all together

A transition to retirement income swap strategy can be an effective way to boost your superannuation savings. But how much your savings grow will depend on the contributions you make into super through salary sacrifice, compared with the amount you withdraw as your pension. If you take out more money than you put back in, your savings will decline in value. This will result in you having less money to fund your retirement when you stop working

We can help you strike the right balance and determine whether a transition to retirement strategy is the best way for you to maintain your income and lifestyle as you move towards retirement.

Michael`s Story

Michael has reached 55 and starts a transition to retirement income swap strategy. 
Michael’s gross salary is $60,000 per year. He has accumulated $200,000 in super savings, and elects to use the full amount to start a non-commutable allocated pension and draws the maximum pension of $20,000. 
Together with Michael’s pension income, he can salary sacrifice $24,687 per annum and still receive the same amount of money in his pocket.
After a year, the transition to retirement strategy has resulted in:
Michael paying $984 less tax. 
An increase of $984 in Michael’s superannuation balance (a withdrawal of $20,000 and an after tax contribution of $20,984). 
The investment earnings that Michael has earned on the $200,000 in his pension account will not be taxed (if these funds remained in his super account, the earnings would be taxed at 15 per cent).
Transition to Retirement
The case study is illustrative only and is not an estimate of the investment returns you will received or fees and costs you will incur.


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