What is a transition to retirement pension?
Transition to retirement pensions allow you to access your superannuation as a non-commutable income stream, after reaching preservation age (see below), but while you are still working.
The aim of these income streams is to provide you with flexibility in the lead up to retirement. For example, you may choose to reduce your working hours and at the same time access your superannuation as a transition to retirement pension that can supplement your other income. It may also allow you to salary sacrifice or claim tax deductions for contributions to give your retirement savings a boost.
Not all superannuation funds offer transition to retirement pensions, so you need to check with your own fund to see if they do. You can also start one in a self-managed superannuation fund.
Are there any special characteristics?
These pensions are essentially like a normal account-based pension, but with three important differences.
Firstly, they are non-commutable, which means they cannot be converted into a lump sum until you satisfy a condition of release, such as retirement or age 65.
Secondly, you have a minimum pension amount you must withdraw each year but you can only withdraw up to 10% of the account balance (at 1 July). No lump sum withdrawals are allowed.
Thirdly, the earnings continue to be taxed at 15% in the fund, regardless of start date.