Super pensions

Converting your superannuation to a pension is an option if you have reached your preservation age and met a condition of release. Your preservation age is between 55 and 60, depending on your date of birth. Standard conditions of release for super pension withdrawals are:

• retirement,
• beginning a transition-to-retirement income stream,
• ceasing an employment arrangement after the age of 60, even if you get a job with a new employer,
• turning 65 years of age,
• becoming permanently incapacitated,
• being diagnosed with a terminal medical condition.

Your dependants can also be entitled to access your super as a pension when you die if you have arranged for this to happen, though there are likely to be tax implications.

There are six main types of super pension:

• Account-based pension: This is the most common type of pension. The pension is paid from a super account held in your name.
• Annuities: Annuity payments are purchased with a lump sum and enable fixed payments for the remainder of your life or for a defined period. The value of account-based pensions on the other hand can rise or fall depending on the market value of the underlying investments supporting them.
• Transition-to-retirement pension (TTR or TRIS): This is a pension you can commence if you have reached your preservation age but are still working. The earnings on funds that support TTR pensions are still taxed at 15%, unlike the funds that support your super pension are when you have retired. You must start a TTR prior to turning 65.
• Defined benefit fund: This type of pension pays a guaranteed income stream for life. However, they are not common and generally only held by long-term members of public sector or corporate funds.
• Reversionary pension: This is a pension that reverts to your partner when you die.
• Death benefit pension: Some funds allow your dependants to receive your death benefits as a pension when you die, such as your spouse.

If you start a super pension income stream, you need to transfer funds from your accumulation account to your retirement account to fund your pension. The earnings on these funds are tax-free. You can transfer up to the transfer balance cap (up to $1.7 million) into your retirement account. You need to withdraw a minimum percentage of your retirement account balance each year, ranging from 4 to 14% depending on your age.

Super pensions are tax-free after the age of 60 but may affect your eligibility for the Age Pension.

The alternative to withdrawing super as a pension is to take your super benefits as a lump sum.