If you’re wondering how you can access your super via different types of retirement pensions, how these differ to the government’s Age Pension, and what you should know if you’re considering taking your super as a lump sum, it’s a good idea to get across some of the information below. Also, keep in mind that to access your super, you generally need to have reached your preservation age (which will be between 55 and 60, depending on when you were born) and retire.
Below we explain:
A transition to retirement pension (TTR) enables you to access some of the super you’ve saved via regular payments once you reach your preservation age, even if you’re receiving an income from your employer or business. Having access to this type of pension could provide you with greater financial flexibility, as you can periodically withdraw money from your super while continuing to work full-time, part-time or casually.
You can only withdraw between 4% and 10% of your super savings each financial year. And, you aren’t able to make lump sum withdrawals unless you meet certain conditions of release, such as retirement. It’s also worth noting the income you receive is based on the amount you have in your super, so you won’t be guaranteed an income for life.
Up to age 60, the taxable amount of your income from a TTR pension is taxed at your personal income tax rate, less a 15% tax offset. Then, once you turn 60, it is completely tax-free. The investment earnings within a TTR income stream however, are subject to the same maximum 15% tax rate that applies to super accumulation funds.
Setting up a TTR income stream may present you with some useful opportunities. For example, you could either work less or work the same hours while sacrificing some of your salary into super. In both cases, you can use your TTR income stream to supplement any reduction in your take-home pay.
There are however numerous things to consider, particularly when it comes to weighing up your circumstances and properly assessing any potential tax implications. These include:
An account-based pension (or allocated pension) allows you to draw a regular income from your super savings once you have reached your preservation age and retired. Because it is made up of the money you’ve saved in super, which could differ from person to person, it doesn’t provide an endless income.
Typically, there’s no limit to how much you can withdraw from an account-based pension, however each year you’ll need to withdraw a minimum amount. This figure is calculated based on your age and will be a percentage of your account balance, and can be seen in the table below.
|Age||Yearly minimum withdrawal|
If you’re converting your super into an account-based pension to create an income in retirement, you’re restricted to transferring a maximum of $1.6 million into your pension account, not including subsequent earnings. If you have a balance above that, the excess will need to be left in the super accumulation phase (where earnings will be taxed at the concessional rate of 15%) or taken out of super completely.
Also note, if you transfer $1.6 million into an account-based pension, even if your balance reduces over time, you typically won’t be able to top up your pension a second time.
Remember, whether an account-based pension is tax effective will depend on your circumstances, so it’s important to ensure you’re across any tax implications before making a decision.
You can generally choose from a range of investment options, and an investment manager will make the day-to-day investment decisions. Note, a broader range of investments may be available depending on the type of fund you have, and returns from an account-based pension are tied to movements in investment markets.
An annuity provides a series of regular payments over a set number of years, or for the remainder of your life, depending on whether you opt for a fixed-term or lifetime annuity. The payments you receive depend on factors, such as the amount you put in and actuarial calculations, which look at economic and demographic assumptions to estimate future liabilities.
The Age Pension is different altogether, as it is a government benefit paid to eligible Australians that have reached their Age Pension age (which we’ve listed below). Another thing to keep in mind is the age you’ll be able to access your super and the government’s Age Pension (if you’re eligible for it), typically won’t be the same.
|Date of birth||Age Pension eligibility age|
|Before 1 July 1952||65 years|
|1 July 1952 – 31 December 1953||65 years and 6 months|
|1 January 1954 – 30 June 1955||66 years|
|1 July 1955 – 31 December 1956||66 years and 6 months|
|From 1 January 1957||67 years old|
Currently, to be eligible for a full or part Age Pension, you must satisfy an income test and an assets test, as well as other requirements1. The value of various assets you have, and any income you receive, will determine whether you’re eligible and what amount of money you’ll receive in Age Pension payments. The maximum Age Pension rate for a single person is currently $907.60 a fortnight and for a couple it’s currently $1,368.20 a fortnight2.
When the time comes and you’re able to access your super, you might also be wondering whether you’d be better off taking the money as a lump sum rather than moving it into a pension product. While this may be tempting, it won’t be the best option for everyone and there may be tax implications to consider. You should think about how you plan to spend or invest this money, and what you’ll live on if you have minimal or no super left.
If you’re going to take a lump sum you should also look into tax rules. If you’re over age 60, super money you access will generally be tax free, but if you’re under 60, you might have to pay tax on your lump sum.
Another thing to think about is if you invest the money, depending on where you put it, you may be taxed on the interest you make, or possibly the capital gain. Whether taking your super as a lump sum is tax effective or not will depend on your individual circumstances.
This information is provided by AMP Life Limited. It is general information only and hasn’t taken your circumstances into account. It’s important to consider your particular circumstances and the relevant Product Disclosure Statement or Terms and Conditions, available by calling 13 30 30, before deciding what’s right for you. Read our Financial Services Guide for information about our services, including the fees and other benefits that AMP companies and their representatives may receive in relation to products and services provided to you.
All information on this website is subject to change without notice. Although the information is from sources considered reliable, AMP does not guarantee that it is accurate or complete. You should not rely upon it and should seek professional advice before making any financial decision. Except where liability under any statute cannot be excluded, AMP does not accept any liability for any resulting loss or damage of the reader or any other person.