Preservation age and transition-to-retirement pensions align

The term ‘preservation age’ refers to the minimum age at which a member of a super fund can withdraw or access their superannuation benefits and it is determined by the member’s date of birth.

As you can see, age 60 is the oldest preservation age and is applicable for anyone born after 1 July 1964.

And if you think about this more closely, it means that from 1 July 2024, the preservation age will always be age 60 for all super fund members born after 1 July 1964, which will allow us to do away with tables like the one above! Of course, this is dependent on future governments not tinkering with the preservation rules. 

Accessing superannuation benefits

Although preservation age marks the earliest age you can access your super, you are still required to meet a condition of release before you can withdraw some, or all, of your superannuation savings.

Some of these are ‘age-based’ conditions of release while others are ‘event based’.

These conditions of release include:

• Reaching preservation age and retiring (age based)
• Attaining preservation age and starting a transition-to-retirement pension (age based)
• Ceasing an employment arrangement on or after age 60 (age based)
• Turning 65, regardless of whether or not you are still working (age based)
• Temporary or permanent incapacity (any age)
• Severe financial hardship (event based)
• Compassionate grounds (event based)
• Terminal medical condition (event based)
• Death (event based)

Transition-to-retirement pensions (TTR or TRIS)

One of the more recently introduced conditions of release is attaining preservation age and starting a transition-to-retirement pension (TTR). These pensions were first allowed in 2005.

TTRs allow access to your retirement savings once you reach your preservation age, regardless of your working status, and allow you to access between 4% and 10% of your pension balance each year.

They are often used in the final years before retirement when you may want to spend less time at work and more time with family or travelling. Hence the name ‘transition’ to retirement.

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One main drawback often raised regarding TTRs is that the pension income received before age 60 needs to be included in your assessable income and taxed each year, albeit with a 15% tax offset.

By comparison, superannuation pension payments received after age 60 are tax free to the recipient!

Now that the TTR age and the tax-free pension payment age align at age 60 from 1 July 2024, there is an expectation that there will be a considerable increase in the use of TTR pensions in future.

Essentially all payments that are received from a TTR will be tax-free pension payments. Now that is certainly something to consider if tax on pension income was a concern in the past. It also opens up potential tax-effective super strategies in the lead-up to retirement.

The bottom line

If accessing your super by way of a transition-to-retirement pension is something that may be of interest to you, contact your super fund and find out what you need to do.

If you have an SMSF, check your SMSF trust deed or contact your fund administrator for any fund specific rule or requirement to commence a TTR in your fund.

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TTR pensions can be more beneficial for some fund members than others, so deciding whether a TTR strategy is appropriate for you is a crucial 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.