What is a transition to retirement?

I'm approaching retirement | | 2 min read

Transition to Retirement (TTR) pension accounts are a tool that can help you maximise your retirement savings while potentially scaling back your work hours. 

If you’re starting to think about retirement, they can provide an important first step. So here’s what you need to know.   

What is a TRP account?  

According to ABS data, half a million people in Australia intend to retire within five years. Setting yourself up to retire, planning ahead and understanding your options is an important part of preparing to wind down from working.  

A TRP account is a strategy that allows you to start to draw down on your super, while you’re still in employment.  This means you can start to reduce your working hours, while supplementing your income.  

In practice, this enables you to withdraw income from your pension account to replace the income from a reduced working week.  

Alternatively, you can use it to boost your super as you approach retirement. Using a TRP account with salary sacrificing can be an effective way to quickly grow your super thanks to the available tax concessions.  This is something a financial planner can assist with

Tax and a Transition to Retirement Pension 

If you’re approaching retirement, you can move some of your super balance into a Transition to Retirement Pension (TRP) and start using it as an income stream.  

Because you’re supplementing your income with your super, you will no longer need quite as much cash from your actual income. This may allow you to salary sacrifice some of your normal wage into super.  

Here’s the clever part. Salary sacrifice contributions are taxed at only 15%. Which is often lower than your marginal tax rate, meaning you can pay less tax overall.  This means you’ll be in a stronger overall position due to the tax savings.  

Alternatively, the income stream from a TRP can also be used to cut back on your work hours (while mainting your income). So you might go down to only four-days per week and use your TRP income to supplement the difference.

The good news is one of our financial planners can help you set up a TRP. They can also show you exactly how it may impact your income, your super, and your long-term retirement plans.  

Is a TRP account for me? 

The great thing about a Transition to Retirement Pension (TRP) is the flexibility it offers. 

Whether you want to scale back your work hours (while maintaining your income) or would like to boost your super as you near retirement, it provides government approved methods to do so. 

It’s also easy to set up. Our financial planners can help you understand your options, showcase different scenarios, and help you make an informed decision.  

You can book an appointment with an Equip financial planner via the banner below. 

Issued by Togethr Trustees Pty Ltd ABN 64 006 964 049, AFSL 246383 ("Togethr"), the trustee of the Equipsuper Superannuation Fund ABN 33 813 823 017 ("the Fund"). The information contained herein is general information only and does not take into account your personal financial situation or needs. You should consider whether this information is appropriate to your personal circumstances before acting on it and, if necessary, you should also seek professional financial advice tailored to your personal circumstances. Where tax information is included, you should consider obtaining personal taxation advice. Before making a decision to invest in the Equipsuper Superannuation Fund, you should read the appropriate Product Disclosure Statement (PDS) and Target Market Determination for the product which are available at equipsuper.com.au.  Financial advice services may be provided to members by the trustee’s related entity Togethr Financial Planning Pty Ltd (ABN 84 124 491 078; AFSL 455010). *Past performance is not an indication of future performance.

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