A transition to retirement strategy could allow you to reduce your work hours, or work the same hours, and save on tax without reducing your take-home pay.


Even if you’re nearing retirement age, you might not want to leave the workforce just yet. Maybe you want to save more money, or perhaps you enjoy the interaction and mental stimulation of being among colleagues. 

Whatever the reason, a transition to retirement (TTR) strategy could provide financial flexibility as it enables you to access a portion of your super while working full-time, part-time or casually. We explore how a TTR strategy works, some of the restrictions, potential benefits and things to consider. 

It can be complicated, so speak with a financial adviser if possible, so you can make an informed decision about whether a TTR strategy is right for you.


How a TTR strategy works 

Generally you can access your super under a TTR income stream (also known as a TTR pension) once you’ve reached your preservation age. This will be between age 55 and age 60, depending on when you were born.

A TTR income stream allows you to access up to a maximum of 10% of your super as regular pension payments each financial year. And, if you want to keep working, you can also continue receiving an income.

If you’re employed

If you’re employed and want to keep working, you’ll keep getting superannuation guarantee (SG) payments, providing you meet the requirements. 

When using a TTR strategy you can choose to work less, or continue working the same hours while salary sacrificing or making personal deductable contributions (PDCs) into super. In both cases, you can use the income from your TTR pension to supplement any reduction in your take-home pay.

If you’re self-employed 

A TTR strategy works in the exact same way, except self-employed people aren’t able to salary sacrifice. Instead you can only make personal deductable contributions into super. Whether you are employed or self-employed, you can continue using this strategy until you are ready to retire fully from the workforce. 

Withdrawal restrictions

A TTR income stream doesn’t allow you to withdraw your super as a lump sum. You can generally only do that once you’ve reached preservation age and meet certain conditions – like retirement.

Instead, you can choose to receive between 2% and 10% of your super balance as regular pension payments. From 1 July 2021, the minimum payment required for a TTR income stream will revert back to 4%.

It’s also worth noting that the income you receive is based on the amount you have in your super, so you won’t be guaranteed an income for life. And, by drawing down on your super, you may be reducing the amount you have left to fund your eventual retirement.

How TTR income streams are taxed

Up to age 60, the taxable amount of your TTR income stream paid to you as income is taxed at your personal income tax rate, minus a 15% tax offset. Then, once you turn 60, the income you receive from your TTR pension is completely tax-free. The investment earnings within a TTR income stream are subject to the same maximum 15% tax rate that applies to super accumulation funds.

How TTR pensions are different to account-based pensions 

Firstly, you generally can’t access an account-based pension until you’ve met a condition of release such as reaching preservation age and retiring. If you’ve retired after reaching preservation age, you can move your super into an account-based pension, which provides you with a regular income stream in retirement. Preservation age is the age you’re allowed to gain access to your super and varies based on the year you were born. 

With an account-based pension, there’s a minimum amount of income that must be withdrawn each year but no maximum, and you’re able to access lump sums as required.

On the other hand, you can access a TTR pension once you reach your preservation age without having to retire. However, with a TTR pension you are limited to a maximum withdrawal amount each year and can’t access your money as a lump sum. 

One similarity is that both pensions are based on the amount you have saved in your super. Neither guarantees an endless income, which is why it’s important to know how much you need to retire

Other things to consider 

It’s important to weigh up your particular circumstances and properly assess any potential tax implications before considering a TTR pension. This includes:

  • talking to your super fund, as not all funds accommodate TTR income stream
  • figuring out if you want to reduce your work hours 
  • thinking about your income sources and calculating your income needs
  • finding out what your government entitlements are, as there may be implications.

Before deciding if a TTR strategy is right for you, it pays to do your research and speak to a financial adviser. Seeking financial advice might be worthwhile to help you understand the possible benefits and implications for your particular circumstances. 

What’s next?

Get a guide to how much you might need in retirement

Important information

Any advice in this article is provided by AWM Services Pty Ltd ABN 15 139 353 496, AFSL No. 366121 (AWM Services) and is general in nature only. It doesn’t consider your personal goals, financial situation or needs. 

Before deciding what’s right for you, it’s important to consider your particular circumstances and read the relevant product disclosure statement or terms and conditions available from AMP at amp.com.au or by calling 131 267.

You can read our Financial Services Guide online 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 it provides. You can also ask us for a hard copy. All information on this website is subject to change without notice. AWM Services is part of the AMP group.

Taxation issues are complex. You should seek professional advice before deciding to act on any information.

Except where liability under any statute can’t be excluded, AMP doesn’t accept any liability for any resulting loss or damage to the reader or any other person.