If you’re aged 60 or over, there’s a way you can access some of your super even if you’re still working. By starting what’s known as a ‘transition to retirement’ (TTR) pension, you can receive a tax-free income to help you ease into retirement. Or, if you plan to keep working full-time, you could use the income to boost your super, reduce debt and more.

Replace income when cutting back work

If you want to scale back your working hours, you can use the income from a TTR pension to top-up your salary and maintain your living standard. Because the pension payments are tax-free, you generally won’t need to draw as much from the TTR pension to replace your reduced salary, as the example below illustrates.

Case study – Use TTR pension to replace reduced salary

Rohan, aged 60, works full-time, earns a salary of $200,000 pa and has $1.2m in super. He wants to cut back to a three-day working week and his salary will reduce by $80,000 to $120,000 pa. He will use his super to start a TTR pension and will only need to draw pension payments of $49,050 to replace his reduced salary of $80,000.

* Based on the 2024/25 rates and thresholds. Includes Medicare Levy

Other ways to benefit from a TTR pension

Even if you don’t plan to cut back on work right now, starting a TTR pension may help you to:

• Grow your super tax-effectively: For example, you may be able to arrange with your employer to contribute some of your pre-tax salary into super and use a TTR pension to replace your reduced salary.
• Reduce debt: You may want to use the TTR income payments to make additional repayments on your mortgage or other debts.
• Manage tax for adult beneficiaries: Using the TTR payments to make after-tax contributions into your own super may help to reduce the tax payable on your super by adult beneficiaries if you pass away.
• Manage super balances as a couple: Using TTR payments to make after-tax contributions into your spouse’s super may help you to maximise super contribution, retirement income and social security opportunities as a couple.

TTR vs ‘retirement phase pensions’

If you retire at age 60 or over, reach age 65 or meet certain other ‘conditions of release’, you are eligible for a ‘retirement phase pension’. These pensions are more tax-effective and generally more flexible than TTR pensions, as the table below highlights.

Speak to your Shadforth adviser

While using your super to start a TTR or retirement phase pension can provide many benefits, you should speak to your financial adviser before going ahead, to ensure it suits your needs and circumstances.