Transition to Retirement (TTR): Access Super While Still Working
IntuitiveCalc Team
Financial Content Specialist
Reached preservation age and want to reduce work hours, boost super, or supplement income? A Transition to Retirement pension could be your answer.
What is Transition to Retirement?
Transition to Retirement (TTR) is a strategy that allows you to access some of your superannuation while still working. Once you reach your preservation age (between 55 and 60 depending on when you were born), you can start a TTR pension and receive regular payments from your super, even while continuing to work and earn a salary.
Key TTR Benefits
1. Reduce work hours without reducing income
2. Salary sacrifice more to super while replacing income with TTR
3. Tax-free income from age 60
4. Continue working and growing your super
Who Can Access a TTR Pension?
Preservation Age Requirements
Your eligibility for TTR depends on your preservation age, which is based on your date of birth:
| Date of Birth | Preservation Age | TTR Eligible From |
|---|---|---|
| Before 1 July 1960 | 55 | Already eligible |
| 1 July 1960 - 30 June 1961 | 56 | Already eligible |
| 1 July 1961 - 30 June 1962 | 57 | Already eligible |
| 1 July 1962 - 30 June 1963 | 58 | Already eligible |
| 1 July 1963 - 30 June 1964 | 59 | After turning 59 |
| From 1 July 1964 | 60 | After turning 60 |
Other Requirements
- You must have preserved superannuation benefits
- You must NOT have retired permanently
- No minimum super balance required (but needs to be enough to be practical)
- Can start TTR even if still working full-time
How TTR Pensions Work
Payment Limits
TTR pensions have minimum and maximum payment limits each financial year:
| Payment Type | TTR Pension | Account-Based Pension (Retirement) |
|---|---|---|
| Minimum payment | 4% of balance (varies by age) | 4% of balance (varies by age) |
| Maximum payment | 10% of balance | No maximum |
| Lump sum withdrawals | Not allowed | Allowed |
Minimum Payment Percentages by Age
| Your Age | Minimum Payment % | Example: $400k Balance |
|---|---|---|
| Under 65 | 4% | $16,000 minimum |
| 65-74 | 5% | $20,000 minimum |
| 75-79 | 6% | $24,000 minimum |
| 80-84 | 7% | $28,000 minimum |
| 85-89 | 9% | $36,000 minimum |
| 90-94 | 11% | $44,000 minimum |
| 95+ | 14% | $56,000 minimum |
The 10% Maximum Cap
The 10% maximum is the key restriction of TTR pensions. On a $400,000 balance, you can draw a maximum of $40,000/year while in TTR phase. This limit is removed when you meet a condition of release (retirement, age 65).
Tax Treatment of TTR Pensions
Tax on Pension Payments
| Your Age | Tax on TTR Payments | Notes |
|---|---|---|
| Under 60 | Taxed at marginal rate less 15% offset | On taxable component only |
| 60 and over | Completely tax-free | Most TTR benefits realized here |
Tax on Investment Earnings (Inside the Fund)
| Phase | Tax on Earnings | Status |
|---|---|---|
| Accumulation (normal super) | 15% | Standard rate |
| TTR Pension (pre-retirement) | 15% | Same as accumulation |
| Account-Based Pension (retired) | 0% | Tax-free earnings |
Important: TTR Changed in 2017
Before July 2017, TTR pension earnings were tax-free. Now they're taxed at 15%, the same as accumulation phase. This reduced the tax advantage of TTR strategies, but they can still be valuable for income and salary sacrifice purposes.
TTR Strategies
Strategy 1: Reduce Work Hours Without Reducing Income
Use TTR payments to supplement reduced salary when you cut back to part-time work:
Example: John, Age 62, Reducing Hours
Before TTR (Full-time):
After TTR (3 days/week):
Result: Similar income while working only 3 days!
Strategy 2: Salary Sacrifice & Replace with TTR
The most tax-effective TTR strategy (for those age 60+): salary sacrifice more to super, then replace the lost income with tax-free TTR payments.
Example: Maria, Age 62, $120k Salary, $400k Super
Without TTR Strategy:
With TTR Strategy:
Why This Works
- Salary sacrifice saves tax at your marginal rate (32.5% - 45%)
- Super contributions only taxed at 15%
- TTR pension is completely tax-free from age 60
- Net result: more super AND potentially more take-home pay
Strategy 3: Boost Super Before Retirement
If you have several years until full retirement, TTR can help you maximize super contributions:
- Salary sacrifice up to the $30,000 concessional cap
- Use carry-forward contributions if eligible (balance under $500k)
- Draw TTR pension to maintain lifestyle
- End up with more in super at retirement
Setting Up a TTR Pension
Step-by-Step Process
- Check eligibility: Confirm you've reached preservation age
- Contact your super fund: Request to start a TTR pension
- Choose amount: Decide how much super to convert to TTR (you can keep some in accumulation)
- Set payment amount: Choose between 4-10% of TTR balance annually
- Choose payment frequency: Monthly, quarterly, or annually
- Provide TFN: Important for tax treatment
- Review investments: Consider if your investment strategy should change
TTR Setup Considerations
- Partial TTR: You don't have to convert your entire balance - you can keep some in accumulation for future contributions
- Multiple accounts: You can have both TTR and accumulation accounts
- Investment choice: TTR can have different investment options than accumulation
- Reversible: You can convert TTR back to accumulation if circumstances change
When TTR May NOT Be Right for You
Consider Carefully If:
- Under age 60: TTR payments are taxable (with 15% offset), reducing the benefit
- Low super balance: 10% cap means limited income; admin fees may eat into returns
- High income earner: Division 293 tax may apply to salary sacrifice
- Close to Age Pension: TTR income counts as income for Centrelink means testing
- Small salary sacrifice potential: If you can't salary sacrifice much, the strategy has limited benefit
TTR vs Full Retirement Pension
| Feature | TTR Pension | Account-Based Pension |
|---|---|---|
| Eligibility | Reached preservation age, still working | Retired, or age 65+ |
| Maximum withdrawal | 10% per year | Unlimited |
| Lump sum access | No | Yes |
| Tax on earnings | 15% | 0% |
| Tax on payments (60+) | Tax-free | Tax-free |
| Contributions | Can still contribute to accumulation account | Cannot contribute to pension account |
Converting TTR to Retirement Pension
When you fully retire (or turn 65), your TTR automatically becomes eligible to convert to a retirement-phase pension with better conditions:
- No maximum withdrawal limit
- Lump sum access available
- Investment earnings become tax-free
- Contact your fund to notify them of your retirement
Key Takeaways
Summary: Transition to Retirement
- TTR available once you reach preservation age (55-60)
- Can draw 4-10% of your TTR balance each year
- Payments are tax-free from age 60
- Best strategy: salary sacrifice more, replace with tax-free TTR
- Great for reducing work hours while maintaining income
- TTR earnings taxed at 15% (not tax-free like full retirement pensions)
- Most beneficial for those aged 60+ in higher tax brackets
- Consider professional advice for complex strategies
- Converts to retirement pension when you fully retire or turn 65