Transition to retirement

The good news is that it is really never too late to invest in super, and with the new government rules, there’s never been a better time.

If you’re 55 and still working, our transition to retirement strategy is designed to make a difference to your super in those all-important years before you retire.

This strategy works best if you’re on a higher income and you’re aged 60 or older. However, most people 55 or older can benefit from this strategy.

So, what do you actually do?

  • You salary sacrifice (arrange to have deducted from your pre-tax salary) some of your salary into super, paying only 15% tax on your contribution rather than being taxed at your marginal rate.

  • The exact amount you salary sacrifice will depend on how much you’re earning, because by salary sacrificing, you’re effectively reducing your income.

    One outcome may be that you reduce your income such that you become eligible for the government Super Co-contribution.

    If your income is between $28,980 and $58,980, you are eligible for the government’s Super Co-contribution. At $28,980 you qualify for the maximum co-contribution. For every after-tax dollar you invest in super the government will match it with a further $1.50, up to a maximum co-contribution of $1,500. If your income is more than $28,980 the government’s co-contribution reduces on a sliding scale.

    'Income' for the purpose of government co-contributions is your assessable income plus fringe benefits less self-employed business expenses. If you are under age 60, it also includes income from a pension.

    More information about government co-contributions.

  • Then, to make up your income, you draw down a pension from your super fund. From July 2007, some of the income drawn under age 60 may be tax free, or subject to a tax offset. Any income you draw after age 60 is tax-free.

  • The exact amount of income you draw from your super will depend on your lifestyle and financial commitments, what you currently have in super and whether you want to work part-time or full-time. Differing transition to retirement strategies can be built for you according to whether you need to keep your income the same, boost your income or whether you can afford to reduce your income slightly to increase your super savings.

In our television advertisement we show a worked example of how much of a difference a transition to retirement strategy can make to your end super balance over 10 years.

It quantifies the difference using an AMP transition to retirement strategy can make to the super balance of one person aged 55. Full details and assumptions are as follows:

Details


  • Age: 55+
  • Salary: $65,000 per year
  • Superannuation starting balance: $250,000
  • Employment status: still working from age 55 - 65
  • Returns of 3.89%p.a. for super and 4.30%p.a. for pension are used, after fees, tax and inflation. The fees modelled are based on average AMP retail fees from Flexible Lifetime Super and Flexible Allocated Pension. Inflation is modelled at 2.5%

Without transition to retirement strategy

With transition to retirement strategy
Contributions to super
  • 9% compulsory contributions only
 Contributions to super
  • 9% compulsory contributions
  • The amounts you need to salary sacrifice and withdraw from your super have been calculated using an AMP proprietary financial planning model and vary over time. In this example the amounts used are as follows:
Age Salary
sacrifice
(pre-tax
contributions)		 Income
drawn
from
super
55 $30,474 $25,000
56 $32,634 $26,771
57 $34,902 $28,632
58 $37,284 $30,587
59 $39,787 $32,640
60 $44,150 $31,243
61 $44,150 $31,243
62 $44,150 $31,243
63 $44,150 $31,243
64 $44,150 $31,243
  • After tax contribution of $1,000 p.a. from age 60-65 to qualify for the government co-contribution.
(This level of contributions and withdrawals means that after tax income is unaltered over this period.)

Super balance at retirement: age 65 $442,000

Super balance at retirement: age 65 $514,000

Difference the transition strategy makes over 10 years: $72,000

All details and assumptions have been verified by Rice Warner actuaries, an independent third party.



Making the right choices about transitioning to retirement is crucial. Some of the rules are complex, and you should consider getting professional financial advice to make this strategy work for you.
AMP # 1 for super is based on assets under management (Plan for Life March 07 and DEXX&R March 2007). Find out more about why AMP for super.


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What you need to know
Any advice on this page is provided by AMP Superannuation Limited, ABN 31 008 414 104, AFSL No. 233060, RSE Licence No. L0000550.

The advice is not based on your personal objectives, financial situation or needs. Accordingly you should consider how appropriate the advice is to those objectives, financial situation and needs before acting on the advice and, before buying any financial product, you should read the current customer brochure or product disclosure statement.

We are part of the AMP Group of companies. However, no remuneration or financial benefits are paid to us or our related companies or associates in relation to the advice provided on this page.