How a transition-to-retirement (TTR) pension works

In this guide

Am I eligible?
What are the advantages?
What are the drawbacks?
How do I get started?
How do I stop a TTR pension?
Can I start a TTR from my self-managed super fund (SMSF)?
Look (for advice) before you leap
Common questions about TTRs

If you’re on the final stretch to retirement and would love to start winding back your working hours but don’t think you can afford it, listen up.

Ditto if you plan to keep working full time for a while longer and want to boost your super but haven’t got the ready cash to make extra contributions.

Help could be at hand in both cases in the form of a superannuation transition-to-retirement pension or income stream (TTR). This strategy can be used to either:

Work fewer hours and use a TTR pension from your super to supplement your income
Salary sacrifice some of your salary into super to save tax and withdraw income from your super using a TTR pension to replace some or all the lost income, even if you continue working full time.

Good to know

Transition-to-retirement pensions go by other acronyms. We’ve chosen TTR but you may also see them abbreviated to TRIS (transition-to-retirement income stream).

The examples and tax details we discuss here reflect the position of taxed super funds. If you are a member of one of the much more uncommon untaxed funds you can read more about the tax on income streams in our tax guides to accessing super over age 60 and under age 60.

Am I eligible?

If you’ve turned 60 and are still working, you’re good to go.

If you’re in a defined benefit fund, you may not be able to commence a TTR or you may only be able to use a portion of your benefit. Only about 10% of Australians are members of defined benefit funds, which tend to be public sector or older corporate funds. If this is you, talk to your fund to find out your options.

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What are the advantages?

The taxation of TTR pensions has always been one of their key attractions. While they are still tax effective for many people, they lost a little of their shine after a change to the tax rules a few years back.

Good to know

From 1 July 2017, investment earnings in a TTR pension attract a tax rate of 15% just like super accumulation accounts. Prior to this date, no tax was applied.

What has not changed is the taxation of withdrawals – TTR pension payments are tax free.

Depending on your personal circumstances TTR pensions still have much to offer. They can help you:

Ease into retirement by reducing your working hours without cutting your income or compromising your lifestyle
Continue to make contributions to your super accumulation account (or have them made by your employer)
Receive tax-free pension payments
Grow your super and save tax via salary sacrifice or personal contributions for which you claim a tax deduction, even if you continue working full time.

Learn more about transition-to-retirement strategies.

When you salary sacrifice or make a voluntary concessional contribution into super, your contributions are taxed at the concessional rate of 15% up to an annual cap of $30,000. (Prior to 1 July 2024 the concessional cap was $27,500). If your total super balance was below $500,000 on the prior 30 June, you can also contribute more than the standard cap by using carry forward. This can be a valuable strategy if your marginal tax rate is higher than 15%, and your super balance could do with a boost.

Example

Jill is 60 and earns $100,000 a year, which puts her in the 32% tax bracket (including the Medicare Levy). She has $300,000 in super and wants to keep working full time until at least age 65 but wishes she could do more to increase her retirement savings. As she doesn’t have the spare cash to make extra contributions, she decides to take advantage of a TTR strategy.

Jill can withdraw a pension of up to $30,000 in the current financial year – 10% of her balance. She decides to withdraw this amount and salary sacrifice back into her accumulation account to maintain the same take-home pay.

Jill has unused concessional cap space of $82,500 from prior years so she can exceed the standard annual $30,000 concessional cap without generating excess contributions that are taxed at a higher rate.

To reduce her take-home pay from work by $30,000 per year (and replace it with $30,000 withdrawn tax free from super), Jill salary sacrifices $44,350 in 2025-26. After 15% contribution tax is deducted, this results in $37,697.50 being added to her super account.

The bottom line is an overall tax saving and a net boost to her retirement savings of around $7,700 for the year. This is Jill’s net additional contribution minus the pension income she has withdrawn.

After her employer’s contributions are added, Jill has used up $29,350 of her unused concessional cap space from prior years. If her balance remains under $500,000 on 30 June 2026, she can continue using her remaining available carry-forward amounts in the following financial year.

Disclaimer

These are ballpark figures. Everyone’s TTR calculation will be different, depending on their income, super balance, eligibility to use carry forward and marginal tax rate. To model your own situation you may like to try a transition-to-retirement calculator.

What are the drawbacks?

Here are some things to keep in mind:

The more of your super funds you withdraw during your TTR phase, the less money you’ll have available when you do retire – unless you replace your withdrawals with contributions.
If you or your partner currently receive any social security payments, a TTR pension may affect your entitlements.
Your fund may require you to leave a minimum amount in your accumulation account to maintain your insurance cover.
The tax savings (and super boost) of salary-sacrifice or voluntary contributions into super may not be worthwhile for low- and high-income earners, as illustrated below.

For a low-income earner on a marginal income tax rate of 16% or less, the tax savings of a TTR strategy will be small.

Take the example of Dave, who earns $35,000 and can afford to salary sacrifice $5,000 a year into super considering his maximum TTR withdrawal. He would only save $350 in tax by doing this (the difference between the income tax and Medicare levy he would otherwise pay and the 15% super tax rate). The fees for maintaining a separate TTR pension account could eat up a lot of this saving. Dave may be better off making an after-tax super contribution of $1,000 (if he can afford it), for which he would receive the maximum government co-contribution of $500.

For more on the co-contribution and other ways to add to your super, see SuperGuide article What contributions are best for me?

For high-income earners, there may be limited scope to make additional concessional contributions.

Take the example of Rajiv, who earns $200,000 and receives Super Guarantee payments of $24,000 for 2025–26, just $6,000 short of the annual $30,000 concessional cap. He has enough ready cash to make a tax-deductible contribution of that amount without having to bother with a TTR pension.

How do I get started?

You start a TTR pension by transferring some of your super from your accumulation account into a transition to retirement pension account.

The transferred funds don’t count towards your transfer balance cap because you’re not in retirement phase. The funds in your TTR pension account will count towards your transfer balance cap once you do retire or turn 65, as the pension will convert into retirement phase. This cap is currently $2 million.

You must leave at least a small balance in your accumulation account so that it remains open to receive your employer’s compulsory super guarantee contributions or any voluntary contributions you may want to make.

Investment earnings in both your accumulation and pension accounts are taxed at 15%.

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Good to know

If your super is in an untaxed government fund, tax will be payable when you transfer money into a TTR pension.

The TTR product recieving the transfer will deduct 15% tax from the untaxed element. Your minimum and maximum withdrawals will be calculated based on your balance after tax is deducted.

If you transfer more than the untaxed plan cap ($1,865,000 in 2025-26) to a TTR pension the original fund will withold 47% tax from the excess amount before transferring the remainder to your pension provider. This converts the excess to a taxed element that will not have further tax deducted when it reaches the TTR product.

You must withdraw a minimum of 4% of your TTR pension account balance each year (if you’re aged under 65) up to a maximum of 10%. At least one withdrawal must be made each year.

Once you’re over 65 there are different minimum pension payments rates.

Learn more about the minimum pension payment rules (including calculator).

If you’re aged 65 and over, there are no restrictions on the amount of super you can withdraw even if you’re still working. Rather than set up a TTR pension you can start a retirement phase pension, which has added benefits (outlined below).

How do I stop a TTR pension?

A TTR pension automatically converts to a retirement phase pension when you meet a superannuation condition of release, such as retiring or reaching age 65 – unless you choose to transfer it back into the accumulation phase and stop receiving pension payments.

When your TTR pension becomes a retirement phase pension, you’ll be entitled to tax-free investment earnings and no upper limit to withdrawals. If you’re still working, you can continue to use the income from your retirement pension to use the same strategies you did for your TTR, but without the maximum limit on your withdrawals.

You can also transfer your pension account funds back into your accumulation account at any time. You must have made at least the pro-rated minimum withdrawal before you stop your TTR pension. For example, if you stop the pension exactly halfway through the financial year, you must have received 50% of that year’s minimum payment before stopping the pension.

Can I start a TTR from my self-managed super fund (SMSF)?

Yes, provided this is allowed in your SMSF’s trust deed.

If you’re a trustee and want to start a TTR for yourself or another member of your fund, you should get independent professional advice. The rules are complex and not complying can be costly.

Learn more about starting a pension from your SMSF.

To learn more about TTRs, view our webinars on TTRs:

Look (for advice) before you leap

Transition-to-retirement pensions have real benefits for some people but may be less attractive for others. Deciding whether a TTR strategy is appropriate for you is an important decision and will depend on your personal financial circumstances and goals. As the information in this article is general in nature, and the calculations around TTR pensions can be complex, we suggest you seek independent financial advice before you act.

Common questions about TTRs

You can commence a TTR with as little or as much as you wish, just check with your super fund or review your SMSF trust deed for any rules that may be applied by the fund.

TTRs are not considered to be “retirement phase income streams,” therefore the transfer balance cap that limits the amount that can be used to start a pension, does NOT apply to TTRs.

The TTR rules allow restricted access to superannuation balances once you have reached your preservation age, regardless of your work status. However, if you are not working and are retired, then you may be able to access your super by using another condition of release, without the need to use a TTR pension.

For instance, if you have reached your preservation age and are fully retired, you can access all your super by way of a retirement phase pension or even as a lump sum; you would not need to use a TTR. The same would apply where you have turned 65, regardless of your work status.

Your preservation age is determined by your date of birth and from 1 July 2024 the preservation age increased to age 60. Therefore, if you are looking to start a TTR pension at any time in the future, you will need to be at least 60 years old.

Pension payments that you receive before age 60 may be subject to tax, depending on the tax components that make up each pension payment. Keep in mind that pension payments are paid proportionately from the relevant tax components that make up the pension balance.

These tax components include:

Tax-free component: These amounts come from your after tax (non-concessional) contributions into your super account. Pension payments made from your tax-free component are received tax free, there is no tax payable on these amounts.
Taxable component: These amounts come from your concessional (before-tax) contributions, including employer contributions, salary-sacrifice contributions, and any personal super contributions for which you claimed a tax deduction. This component also includes all investment earnings related to your accumulation account.

If you are under age 60, the taxable component of your pension payments is included in your assessable income and taxed at your marginal tax rate, but you receive a 15% tax offset.

If you are 60 or older, the taxable component of your pension payments is received tax free.

Good to know

The examples and tax details included in this article reflect the position of taxed super funds, which include retail funds, industry funds and SMSFs. If you are a member of one of the much more uncommon untaxed funds you can read more about the tax on income streams in our tax guides to Accessing super over age 60 and Accessing super under age 60.

No. Super fund earnings on assets that support TTR pensions are NOT tax free. The super fund will need to include any relevant fund earnings on these assets in their assessable income and pay the appropriate levels of tax.

This is because TTRs are not considered to be retirement phase income streams.

When the recipient of a TTR meets a further condition of release such as retirement or age 65, their TTR will become a retirement phase TTR and at that time, the relevant fund earnings will become tax free.

If you are a member of a retail or industry super fund, you should contact your fund and follow their pension commencement process. This would usually involve completing a pension application and nominating how much of your super balance you will be using to start your TTR pension.

For SMSF members, you will need to review your fund’s trust deed and follow all requirements set out for the establishment of a pension. Again, this would usually involve completing a pension application form and trustee minutes or resolutions. There would also be other administrative requirements that need to be addressed, for instance valuing the fund’s assets and bringing the fund’s financial accounts up to date so as to determine the member balance in the fund.

Read more about SMSFs and how to start a pension

TTR pensions are completely optional. You are not forced to start one when you reach your preservation age, and those who already have sufficient income from other sources may not need to supplement their income with a TTR pension.

However, there may be other benefits in using one of the various TTR strategies, including:

A tax strategy by making salary sacrificed contributions to super which are usually taxed at 15% rather than marginal tax rates and supplementing this income with tax-free pension payments from a TTR pension, where you are over age 60.
Using a recontribution strategy to reduce or eliminate debt sooner.
Estate planning strategies around the members tax components within the fund.
Using TTR payments to equalise spouse super balances.

Read more about the available TTR strategies.

Turning 65 is a condition of release that allows full access to super benefits, so there would be no need for a 65-year-old to commence a TTR pension.

Instead, a 65-year-old would be eligible to start a retirement phase income stream.

Read more about accessing super over age 60.

There are annual limits imposed on the amounts that can be paid from a TTR pension:

A minimum pension payment of 4% must be paid each year; and
A maximum pension payment of 10% applies each year.

These minimum and maximum pension percentages are applied to the pension value at the start of the pension in the year that the pension is established and then applied to the 1 July pension balance for each year after.

Where a TTR pension begins on a day other than 1 July, the minimum pension amount is pro-rated based on the number of days remaining in the financial year.

Lump sum payments, often referred to as lump sum commutations, cannot be paid from a TTR pension.

There are a few outcomes that need to be considered before setting up a TTR pension:

Your end retirement savings balance will be reduced if you commence a TTR
Your super fund may require you to maintain a minimum account balance in your accumulation account for any relevant insurance cover to be maintained
A TTR pension may adversely impact any Government income support that you or your spouse or partner may otherwise be entitled to
TTRs can create a cash flow issue for SMSFs and will often require a change to the fund’s investment strategy and asset allocation, such as an increase in the level of cash holdings.

A TTR pension does not automatically cease when the recipient meets a further condition of release such as retiring or turning 65. The TTR pension continues to be paid to the recipient.

It will however mean that the TTR pension is now considered to be a retirement phase pension, resulting in:

The TTR pension balance will be assessed against the member’s transfer balance cap
The removal of the 10% maximum pension limit
The removal of any lump sum payment restrictions.

It is important to check the balance of your TTR pension before you meet a further condition of release to avoid creating a transfer balance cap issue.

For SMSF members, you will also need to check your trust deed for any fund specific rule that may apply. Some SMSF trust deeds may require an existing pension to be stopped before any existing restriction around payment levels can be changed.

SMSF trustees will also need to consider any transfer balance account reporting requirements that need to be seen to when a TTR pension enters retirement phase.

Starting a TTR pension should not automatically result in a tax outcome for your super fund or for you personally as there is no tax applied to the amounts transferred from the accumulation phase to the TTR pension.

However, you should seek tax advice if you are required to sell assets in your super fund for a transfer to be made into a separate pension account or product.

Yes, super fund trustees can still accept super guarantee (SG) contributions when the relevant member is already accessing their benefits, including access via a transition-to-retirement pension.

Keep in mind that all super contributions, including SG contributions, need to be made to the member’s accumulation account. They can’t be contributed to a pension account the member may have, including a TTR pension account.

There are restrictions imposed on the recipient spouse (the spouse who receives the benefits), under a contribution splitting arrangement, including:

That the receiving spouse must be under preservation age, regardless of their work status; or
Between their preservation age and age 65 and not yet retired.

Where someone is already accessing a TTR pension, then this indicates they would have already reached their preservation age. So based on this, the spouse would only be eligible to receive amounts under a contribution splitting arrangement if they had not yet retired.

View our recent webinar on strategies to split your superannuation with your spouse.

The super rules do not allow additional capital to be added to an existing pension, even amounts that have been received into the fund as contributions.

If a pension recipient wants to move accumulation benefits into retirement phase, then they have two options:

Stop the existing pension by rolling these amounts back to their accumulation account and then recommence a new, larger transition-to-retirement pension; or
Start a new, second transition-to-retirement pension with amounts held in accumulation. The member would then run two, or more, separate pensions in their super fund.

As always, check any fund specific requirement or the relevant SMSF trust deed.

Read more about starting a pension from your super.

The rules for each SMSF are set out in its trust deed. If you want to check if your fund allows TTR pensions, then you need to read your fund’s trust deed.

Your deed would usually have a section on “member benefit payments” or “pensions” where it should set out rules that are specific to transition-to-retirement pensions.

The following are examples of trust deed clauses allowing TTR pensions:

Example 1:

“The Trustee must pay transition-to-retirement pensions consistently and as defined in SIS Regulations (Regulation 6.01(2)). …..”

Example 2:

The Trustee must pay a pension benefit to a Beneficiary in the form of:

A non-commutable account-based pension (transition to retirement)
A defined benefit pension
A market linked pension
….

Example 3:

The “XYZ Superannuation Fund” trust deed permits the trustees to pay any type of pension permissible under superannuation law.”

It would also be a good idea to check your trust deed for any fund specific rules or requirements around the establishment of a pension.

Read more about SMSF trust deeds: Rules and guidelines.

A TTR can be started at any time during the year, so long as the member has met the required condition of release, that is, “attaining preservation age”.

There is no need to wait until the start of the new financial year.

Where a TTR begins on a day other than 1 July, the minimum pension amount (4% of the pension starting balance), is prorated based on the number of days remaining in the financial year.

However, the 10% maximum that applies to transition-to-retirement pensions DOES NOT need to be prorated. Regardless of when a TTR pension commences, the member can access up to a maximum of 10% of the pension opening balance in the first year.

For example, if a member decides to start a pension on 1 May with $700,000, they would still be allowed to access up to $70,000 (10% of $700,00) in that first year.

For some fund members, starting a TTR may not be an appropriate strategy. It really depends on the personal circumstances of the fund member.

It is important that super fund members consider seeking advice in situations where they are not sure what to do or where they want specific advice that relates to their personal position.

Where a member wants to supplement their income with a pension from their super fund, and they are not yet able to access their benefits any other way, then a TTR can be useful.

There may also be other reasons for a member to make use of the TTR strategies available, including a tax arbitrage strategy whereby the member makes salary-sacrificed contributions to super, and then supplements their income with tax-free pension payments from a TTR pension.

There are also other TTR strategies that could prove beneficial. Read more about currently available TTR strategies.

This will depend on the member’s age.

Pension payments received before age 60 may be subject to tax, depending on the tax components that make up each pension payment. Keep in mind that pension payments are paid proportionately from the relevant tax components that make up the pension balance.

These tax components include:

Tax-free component: These amounts come from your after-tax or your non-concessional contributions into your super account. Pension payments made from your tax-free component are received tax free; there is no tax payable on these amounts.
Taxable component: These amounts come from your concessional (before-tax) contributions, including employer contributions, salary-sacrifice contributions and any personal super contributions for which you claimed a tax deduction. This component also includes all investment earnings related to your accumulation account.
If you are under age 60, the taxable component of your pension payments is included in your assessable income and taxed at your marginal tax rate, but you receive a 15% tax offset.
If you are 60 or older, the taxable component of your pension payments is received tax free.

Q: I am currently 63 and I work 4 days a week as a receptionist in a doctor’s surgery. I also work 2 days a week in the local chemist. I am considering giving up my work at the chemist and then starting a transition to retirement pension from my superannuation fund to supplement my income. Can I commence a TTR once I cease my role at the chemist shop?

A: We need to look here at the conditions of release. When are we allowed to access our super? The answer to your question might be something that you weren’t expecting. Before you withdraw money, you need to tell the fund that you’ve met a condition of release. Based on what you’ve set out in your question, you’ve mentioned that you’re over 60. Because you’re aged 60 or over, we need to look at the condition of release relevant for someone that age. The condition of release says you can access your money when an arrangement under which you’re gainfully employed ceases and you turned 60 before ending the employment arrangement. If I look at the scenario which has been put to us, Angela has attained age 60, and Angela is considering ceasing her arrangement with the chemist under which she’s gainfully employed. The definition doesn’t require all arrangements to come to an end.

It just requires an arrangement to come to an end. If an arrangement under which you’re gainfully employed ends and you’re over 60, all your benefits in your superfund at that time become unrestricted, non-preserved. You don’t need to access your benefits under a transition to retirement (TTR) pension. You could start a standard retirement phase pension, a standard account-based pension. No need for a TTR.

Just keep in mind that the definition says an arrangement under which you’re gainfully employed comes from. It doesn’t require all arrangements. If you cease your chemist work, even though you maintain your employment with the doctor’s surgery, it means you’ve met the retirement definition at that point in time. You could access, as I said, benefits without the need to do a TTR.

But I do want you to keep in mind that any new contributions which go into super after that day and/or fund earnings can’t be accessed. They’re preserved. You can’t take those new monies or earnings until you meet a further condition of release, which might be, “Hey, I’m giving up all work, I’m fully retiring”, or simply turning 65. It’s just an anomaly to be aware of when it comes to the retirement definition.

If you’re over 60, you only need to cease an arrangement, not all. ATO has confirmed all that, and the information is certainly available on their website. Again, if you go into the resources that we have on the website, follow each of these guides around when you can access your super.

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Find out more

How a transition-to-retirement (TTR) pension works

Am I eligible?

Retirement planning for beginners

What are the advantages?

What are the drawbacks?

How do I get started?

Supercharge your retirement

How do I stop a TTR pension?

Can I start a TTR from my self-managed super fund (SMSF)?

Look (for advice) before you leap

Common questions about TTRs

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