A transition to retirement account pays you an income while you continue to work. This means you can ease into retirement on your terms.
Key points:
- Work less but maintain your current income and lifestyle by drawing on some of your super savings.
- You can start a transition to retirement account any time after you’ve reached your preservation age. This is the age the government allows you to start withdrawing your super savings, which changes depending on when you were born. Learn more about preservation age.
- It’s a smart way to put your money to work and you could save on tax.
- For a transition to retirement account there is an upper limit to how much you can withdraw each year. Learn more about preservation age.
- At the age of 65 a transition to retirement account will automatically convert into an account-based pension. This account has tax-free income payments and investment returns and has no upper limit to withdrawals.
Who is this account suitable for?
This account can be a good option for people:
- who want to work less but still get the same amount of income to fund their lifestyle or
- who are 60-64 years, can salary sacrifice into super, and would like to take advantage of tax benefits, and
- whose employer offers salary sacrifice – not all employers do.
To open a transition to retirement account you must:
- have reached your preservation age, and
- be 64 years or under.
Setting up a transition to retirement account that gives you the most benefit can be complex. For help working out if it's a good option for you, book an appointment with a financial adviser.
How a transition to retirement account works
Starting a transition to retirement account can help you create a retirement strategy that suits you.
1. Open a transition to retirement account and transfer some of your super into it.
To open a transition to retirement account with Aware Super (we call it a ‘Retirement Transition account’), you can either join online or complete the ‘Open a retirement account’ form in the Aware Super Retirement Income PDS, including selecting ‘Retirement Transition’ under step 4.
This form will let us know how you want your account to be set up. We’ll need to know:
- your personal details
- how much you want to transfer from your super
- how much you want to withdraw as regular income
- what you want to invest in, and
- who you want to nominate as a beneficiary.
Before you apply, read the Product Disclosure Statement and Target Market Determination for more information.
2. If it suits your goals, set up a salary sacrifice arrangement with your employer so part of your pay will automatically go into your regular super account.1
You will need to ask your employer to provide you with all the details on how to set up your salary sacrifice. Your employer will let you know how this will affect your overall salary package. Make an appointment to speak with a qualified financial adviser about whether this suits you and your goals.
1 You cannot contribute any more money into your transition to retirement account once its set up with your initial investment.
3. If you decide to salary sacrifice, you can then top up your take home pay by replacing some or all the amount you’ve contributed into your super account with income from your Retirement Transition account.
In section 7 of the 'Open a retirement account' form, you’ll tell us:
- how much, and
- how often you want to get paid, with money from your Retirement Transition account.
When your account is set up with us, you can make changes to your income payments at any time.
You’ll have two accounts:
- your super account. This account will continue to receive employer and other contributions while you work and
- your Retirement Transition account. This account will pay you a regular income.
Benefits of a transition to retirement account
You can combine a transition to retirement account with your regular super account so that they work together in a tax-effective way.
- Work less, but maintain your income. Topping up your salary with super gives you flexibility - you can work less, but not live on less.
- Save on tax. When you salary sacrifice you only pay 15% tax, which could be less than your marginal tax rate2
- Choose when you get paid. Your income payments can be paid fortnightly, monthly, quarterly, half-yearly or yearly. It’s up to you.
- Your money stays invested. The investment returns you earn by keeping your money invested can help you enjoy a higher income in retirement.
- Turns into tax-free income and earnings. Once you turn 60 your income payments from your super become tax-free. When you reach 65, your transition to retirement account will automatically convert into an account-based pension account) where all investment earnings are tax-free.
2 Your contributions are taxed at a higher rate if you earn $250,000 or more.
Things to consider
- Income payments from this account are subject to annual minimum and maximum income payment withdrawal amounts
- Investment earnings are taxed at 15%.
- If you are 60 or older, income payments are tax free.
- If you’re aged from 55 to 59 your income payments are taxed at your marginal tax rate. But you receive a 15% tax offset in your tax return.
- Because you’re withdrawing your super, consider how long you’ll need it to last.
- Once you reach 65, your Aware Super Retirement Transition account automatically converts to an account-based pension. At Aware Super this is a Retirement Income account.
- You can open a Retirement Transition account with a minimum of $20,000.
- You can’t withdraw more than 10% of your account balance each year.
Where to next?
Learn more about retirement
We’re here to help you create your next chapter with confidence and guide you throughout your retirement.
Attend a retirement webinar
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Speak to a financial planner
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