The Honourable Scott Morrison (the Federal Treasurer) earlier this month has indicted that he is seriously considering closing down or restricting Transition to Retirement (TTR) pensions in the upcoming Federal Budget (early May).
Why is this a concern?
If on Budget Night (early May) Transition to Retirement strategies are closed or restricted and the benefits listed are lost, there will be a small window of opportunity to access whether a TTR plan may benefit you and be implemented.
Mr Morrison has made it clear that the change will apply prospectively, meaning that existing arrangements in place will be grandfathered.
What is Transition to Retirement (TTR)?
A TTR Strategy is where you convert you accumulation superannuation monies into pension account to either:
What are the Benefits of TTR?
1. Boost your super savings
By continuing to work you will still receive employer contributions to your super, meaning your savings can keep growing. You can further boost your super savings if you salary sacrifice some of your earned income to super.
2. Save on Tax
Investment earnings from pension assets are taxed free (0%), unlike accumulation super accounts which are taxed at 15%.
i. E.g. on a $500,000 super balance, this is a tax savings of $3,000 (assuming a return of 5%).
Reduce your personal tax by utilising your pension payments to increase tax effective contributions to super, whilst maintaining your lifestyle.
3. Reduce your work hours and supplement your income
A transition to retirement pension can help you supplement your income if you want to reduce your working hours.
If you do start a transition to retirement pension but no longer need the income, you can stop the pension at any time and simply go back to accumulating your super
Am I eligible?
Once you hit preservation age (55 for many people), you can draw down a pension from your super even if you are still working.
Click here to see if you are eligible.
How do I find out if this strategy is suitable for me?
If you are eligible and would like to speak to an Adviser about your options, please call us on 02 9925 0522.