What happens to my TTR when I turn 65?

A number of changes come into effect when a TRIS recipient turns 65, most of which are beneficial for the member:

• The 10% maximum pension limit for a TRIS will no longer apply, allowing full access to your pension benefits
• The lump sum restrictions that usually apply to these ‘non-commutable pensions’ are removed, giving members more flexibility in the way they access their super
• The TRIS automatically enters retirement phase and becomes a ‘retirement phase pension’. This means that:
  • All super fund income and capital gains relating to the assets that support the TRIS are exempt from tax from this date
  • The value of the member’s TRIS is now counted towards their transfer balance cap.

It is this last point around automatically entering retirement phase that TRIS recipients need to be aware of, as it may require careful consideration and planning.

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SMSF trust deed and pension-specific rules

SMSF members accessing benefits by way of a TRIS need to have a good understanding of the specific wording contained in both the pension paperwork and their SMSF trust deed.

In some cases, the pension agreement and/or the fund’s trust deed may contain fund-specific or pension-specific wording or rules that need to be adhered to.

It is important that all these rules are followed, especially where there are restrictions imposed on making any change to an existing pension.

The ATO make the following statement regarding SMSFs:

Where SMSF trust deed or pension-specific restrictions apply, you may need to formally stop the existing pension and then start a new one.

Entering retirement phase

A TRIS will automatically enter retirement phase when the recipient turns 65; the pension value on this day is used to determine the transfer balance cap outcomes.

It is for this reason that some TRIS recipients need to plan well ahead for this event so as not to create an excess transfer balance cap issue.

Transfer balance cap vs total super balance

Even though the balance of a TRIS only counts towards your transfer balance cap when that pension is in retirement phase, the actual pension balance will always be included in the calculation of your total super balance, whether the pension is in retirement phase or not.

You need to keep this in mind, as your total super balance can affect your eligibility to access super concessions and even your eligibility for non-concessional contributions.