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More super less tax
The Federal Government introduced ‘Transition to Retirement’ rules to allow you to make a gradual transition to retirement from age 55, by drawing on super savings which are taxed less, or not at all if you're aged over 60.
A Transition to Retirement allocated pension can be used as part of a tax-effective savings strategy, while you continue to work. This could help get your retirement savings back on track in the current climate, without impacting your current income.
What is a Transition to Retirement Allocated Pension?
A Transition to Retirement Allocated Pension is a regular income you can draw using your super savings once you reach your preservation age (55 if you were born before 1 July 1960), while you continue to work.
Two common strategies using a ‘Transition to Retirement’ Allocated Pension are:
1. Work less for the same income - You could reduce your employment hours and supplement your reduced salary with income generated from a Transition to Retirement Allocated Pension.
2. Save more super without reducing your income - You could make salary sacrifice contributions to your super and supplement your reduced salary with income generated from a Transition to Retirement Allocated Pension. This strategy may be a very tax effective way to enhance your super savings in the long term while enabling you to maintain your current income level.
The tax benefits
The two strategies outlined above are further enhanced by the following tax benefits:
- Low tax rate - If you make salary sacrifice super contributions, they are taxed at 15% instead of your individual income tax rate
- Tax free amount - If you’re between ages 55 and 59, your ‘Transition to Retirement’ Allocated Pension income may have a tax-free amount. Further, the taxable amount is eligible for a 15 per cent tax offset, whereas salary is taxed at your individual income tax rate
- Tax free over 60 - If you’re age 60 or over, your ‘Transition to Retirement’ Allocated Pension income is tax free
- Tax-free investment earnings - The assets backing the ‘Transition to Retirement’ Allocated Pension will generate tax-free investment earnings, which would otherwise have been taxed at up to 15 per cent.
How it works
Strategy 1 – Work less for the same income
Strategy 2 – Contribute more to your super without reducing your income
How to get started
Your strategy will need careful planning to maximise the value of a Transition to Retirement Allocated Pension. We recommend you speak to a licensed or appropriately authorised financial adviser before commencing a Transition to Retirement Allocated Pension. See details below under “Seeking financial advice”.
There are a number of resources available to you to find out more about Transition to Retirement:
Or, give our Helpline a call on 1300 792 425 if you have any questions.
Seeking financial advice
We recommend you seek personal financial advice on this complex subject. You can set up a face to face appointment with a Mercer financial adviser by calling the Helpline on
1300 792 425.
In your initial consultation, the financial adviser will detail the benefits and possible savings to you of personal face to face advice, and any fees involved. This way, you will know how you can benefit as a result of the advice, before you proceed.
Download the Product Disclosure Statement
To commence your Transition to Retirement Allocated Pension through the Allocated Pension Division of the Mercer Super Trust*, download the Product Disclosure Statement (below), complete the application form and rollover form and send them back to us at:
Mercer Super Trust
GPO Box 4303
Melbourne VIC 8060
Download Product Disclosure Statement
* Mercer Investment Nominees Limited is the trustee of the Mercer Super Trust (ABN 19 905 422 981).
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