TRANSITION TO RETIREMENT
Beginning a transition to a retirement pension from as early as 55 years of age has become a standard strategy for older workers for different reasons.
It can arise from a deliberate decision to reduce working hours and top up income from a super pension, says super adviser Michael Wilkinson, a director of Sydney-based Wilkinson Superannuation.
Or it can be the result of falling on hard times and only being able to find part time work where income needs to be supplemented.
When this happens to someone who is not yet 60, says Wilkinson, the only way super can be regularly accessed is by starting a transition to retirement income stream. While they can declare they are retiring from work with no real intention of working again (which gives them full access to their super), a different way of accessing super can be organised by setting up a transition to a retirement income stream.
The key difference between a standard account-based pension and a transition to retirement income stream is being restricted to withdrawing no more than 10 per cent of a member’s account balance that is used to fund the pension.
While both forms of pension must comply with minimum withdrawal rules, a standard pension has no maximum restriction, whereas a transition income stream does. There are also different tax arrangements for those under 60 starting transition pensions.
A super pension, including a transition pension, started by anyone over the age of 60 pays no tax on the pension payments or on the income earned from investments within the pension account. While someone under 60 with a pension gets the same tax break on investment earning, it’s a different story with the pension payments. They are taxable with a 15 per cent tax offset.
If you need assistance with this issue, please contact Optima Partners.