Retirement unlocks your super

In the hype and hoopla surrounding the latest super changes – primarily tax-free super benefits for over-60s, many of the promoters in the marketplace forget to mention the magic words “preservation rules”.

The rules surrounding accessing your super have not changed. You cannot access your preserved super benefits unless you satisfy a condition of release, such as retiring, reaching the age of 65 or taking an income stream under the transition-to-retirement retirement rules.

If you were a member of a super fund before July 1, 1999, you may have some “unpreserved” benefits, which mean you can access them at any time. You can check whether you have this type of benefit with your super fund, or adviser if you have one.

The most common condition of release is retirement, provided you have reached your preservation age. Preservation age is 55 for anyone born before July 1, 1960. Preservation age gradually increases for those born on or after July 1, 1960, with the preservation age reaching the age of 60 for anyone born on or after July 1, 1964.

TRIPs: If you have reached your preservation age (currently 55) you have the option of starting a transition-to-retirement pension (TRIP), which gives you access to your super benefits while you are still working. If you are taking a TRIP and you are over the age of 60, your pension income will be tax-free and the earnings on assets financing the income stream will also be tax-free. There are stricter rules on the amount you can withdraw from such income streams, however, compared to other types of pensions. You also cannot commute such a pension to a lump sum, unless you retire or reach the age of 65.

Note: Another condition of release relates specifically to those over the age of 60. When a member has reached aged 60, he or she will be considered retired when an arrangement under which they were gainfully employed ceases. An individual who is aged 60 and continues working (with the same employer) with no intention of retiring cannot be considered “retired” for the purposes of accessing super benefits. An individual in these circumstances would need to terminate an employment arrangement.

You may also be able to access your super early in other limited circumstances, for example, if you are suffering financial hardship or permanent disability.

You can read about the other ways to access your super benefits in the article 12 legal reasons to cash your super.

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