Important! Since 1 July 2017, the tax exemption on pension fund earnings financing a transition-to-retirement pension (TRIP) has been removed. This change applies to TRIPs in place before July 2017 as well as TRIPs commenced on or after 1 July 2017.
Note: The special $35,000 concessional contributions cap for over-50s that applied for the 2016/2017 year (or more specifically, applied to anyone who was aged 49 years or over on 30 June 2016), has dropped to $25,000 for all age groups, since 1 July 2017 (from the 2017/2018 year). If you’re considering a transition-to-retirement pension, while continuing to make super contributions, then seek taxation advice on the merits of such a strategy for your personal circumstances. We explain this strategy in Fact 6 of the article below.
I have often described transition-to-retirement pensions (TRIPs) as the super saver’s version of ‘having your cake and eating it’.
A transition-to-retirement pension enables Australians who have reached their preservation age (at least the age 55, and now increased to at least age 58, depending on date of birth) to access their super in the form of a pension without retiring or satisfying an additional condition of release (for more information on your preservation age see first fact below).
TRIPs were originally introduced in July 2005 to help Australians who wanted to transition to retirement via part-time work. By starting a TRIP, you don’t have to retire to withdraw your super benefits. You can work part-time or full-time or even casually.
Although some individuals use TRIPs for a gradual transition into retirement, the majority of TRIPpers appear to have used the strategy for boosting super savings and tax management. The key message many advisers have used when recommending a TRIP is: most Australians who have reached preservation age (at least 55, and now increased to at least age 58 since 1 July 2017) can boost super savings while cutting their tax bill, depending on an individual’s level of income and marginal tax rate.