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.

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 $1.6 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.

Transition-to-retirement (TTR) pensions can be commenced once you have reached your preservation age while you’re still working. However, 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.

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